##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT
TO SECTIONS 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 þ
    
    ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2004
 OR o
    
    TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
 For the Transition period from ___to ___
 Commission file number0-20328 AMTROL Inc. 
 (Exact Name of Registrant as Specified in Its Charter)
 Rhode Island
    
    05-0246955(State or Other Jurisdiction of
Incorporation or Organization)
    
    (I.R.S. Employer
Identification No.)
 1400 Division Road, West
Warwick, RI
    
    02893(Address of Principal Executive Offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (401) 884-6300
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act: None Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes
þ No o. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of Registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. þ Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act
Rule 12b-2). Yes o No
þ. State the aggregate market value of the Registrants voting and non-voting common equity held by
non-affiliates as of the last business day of the Registrants most recently completed second
fiscal quarter: $0 Indicate the number of shares outstanding of each of the Registrants classes of common stock, as
of the latest practicable date: $0.01 Par Value: 100 shares outstanding as of March 31, 2005. Documents Incorporated by Reference: None




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TABLE OF CONTENTS PagePART IItem 1  -  BusinessBackground
    
    
    3Operations
    
    
    3Products and Markets
    
    
    4Distribution and Marketing
    
    
    6Manufacturing, Raw Materials and Suppliers
    
    
    7Seasonality and Backlog
    
    
    8Patents, Trademarks and Licenses
    
    
    8Competition
    
    
    8Employees
    
    
    8Environmental Matters
    
    
    8Item 2  -  Properties
    
    
    9Item 3  -  Legal Proceedings
    
    
    9Item 4  -  Submission of Matters to a Vote of Security Holders
    
    
    9PART IIItem 5  -  Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    10Item 6  -  Selected Financial Data
    
    
    11Item 7  -  Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    12Item 7A -  Quantitative and Qualitative Disclosures of Market Risk
    
    
    25Item 8  -  Financial Statements and Supplementary Data
    
    
    26Item 9  -  Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
    
    
    26Item 9A- Controls and Procedures
    
    
    26Item 9B- Other Information
    
    
    27PART IIIItem 10 - Directors and Executive Officers of the Registrant
    
    
    28Item 11 - Executive Compensation
    
    
    30Item 12 - Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
    
    
    33Item 13 - Certain Relationships and Related Transactions
    
    
    34Item 14 - Principal Accountant Fees and Services
    
    
    34Item 15 - Exhibits and Financial Statement Schedules
    
    
    35Report of Independent Registered Public Accounting Firm
    
    
    36Schedule II - Valuation and Qualifying Accounts and Reserves
    
    
    58Signatures
    
    
    59Exhibit Index
    
    
    60EX-10.13.3 Second Amendment to Loan and Security AgreementEX-10.18 Change to Control Agreement 10/29/2004 - Albert D. IndelicatoEX-10.19 Change to Control Agreement 10/29/2004 - Larry T. GuillemeteEX-10.20 Change to Control Agreement 10/29/2004 - Joseph DePaulaEX-10.21 Severance Agreement 10/29/2004 - Christopher A. LausEX-10.22 Severance Agreement 10/29/2004 - Christopher A. VanHaarenEX-10.23 Severance Agreement 10/29/2004 - Michael M. MontignyEX-10.24 Severance Agreement 10/29/2004 - Gerard McKeownEX-10.25 Severance Agreement 10/29/2004 - Michael TermaatEx-10.26 Form of Indemnification AgreementEx-10.27 Form of Indemnification AgreementEX-14 Code of EthicsEX-21 Subsidiaries of AMTROL, Inc.EX-31.1 Section 302 Certification of C.E.O.EX-31.2 Section 302 Certification of C.F.O.EX-32.1 Section 906 Certification of C.E.O.EX-32.2 Section 906 Certification of C.F.O.
  2




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PART I   
 ITEM 1. BUSINESS 
 Background 
 AMTROL Inc., together with its subsidiaries (AMTROL or the Company), is a leading
international designer, manufacturer and marketer of expansion and pressure control products
used in water systems applications and selected sectors of the Heating, Ventilation and Air
Conditioning (HVAC) market. The Companys principal products include well water
accumulators, hot water expansion controls, water treatment products, indirect-fired water
heaters and returnable and non-returnable pressure-rated cylinders used primarily to store,
transport and dispense refrigerant, heating and cooking gases. Many of these products are
based on a technology originated and developed by the Company, involving a pre-pressurized
vessel with an internal diaphragm to handle fluids under pressure. The Company was incorporated in Rhode Island in 1973, and is the successor of a Rhode Island
corporation which was incorporated in 1946. On November 12, 1996, as a result of a merger
agreement with AMTROL Holdings Inc. (Holdings Inc.) and its wholly owned subsidiary,
AMTROL Acquisition Inc., the Company became a wholly-owned subsidiary of Holdings Inc., a
Delaware corporation controlled by The Cypress Group LLC (Cypress). The Companys
principal executive offices are located at 1400 Division Road, West Warwick, Rhode Island
02893 (telephone number: (401) 884-6300). 
 Operations 
 AMTROL is a market leader in the manufacture of its principal products. The Companys
prominence is attributable to the strength of its brand names, product breadth, quality and
innovation, as well as its marketing, distribution and manufacturing expertise. In addition,
AMTROLs principal markets are highly replacement oriented. A substantial portion of the
Companys core business comes from replacement sales. Sales can be affected by extreme
weather conditions, as well as significant changes in economic circumstances. One of the Companys strengths is its brand names, which are among the most widely
recognized in its markets. For example, the Companys EXTROL®brand is widely
recognized by customers as the leading hot water expansion control tank. Other well-known
brand names of the Company include Well-X-Trol®, Therm-X-Trol®,
BoilerMate, CHAMPION® and Water Worker®. The Company is a recognized
technology leader in virtually all of its core product lines. In fact, many of the Companys
major product lines are considered the industry benchmark, a key strategic marketing
advantage. During its 59-year history, AMTROL has established a strong partnership with wholesalers,
supporting a broad distribution network serving approximately 1,600 customers throughout
North America. The Companys strong brand recognition and reputation for quality ensure
that nearly every significant plumbing, pump specialty and HVAC wholesaler carries at least
one line of its products. This facilitates new product introduction, effectively pulling
the Companys new products through its distribution system. The Company also offers a
broad range of products, which allows the 3




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Companys customers to consolidate their purchases
with the Company and manage inventory more
efficiently. These factors have established AMTROLs products as preferred brands and allow
the Company to realize premium pricing on most of its premium branded products. AMTROL ALFA Metalomecânica, S.A. (AMTROL ALFA), located in Guimaraes, Portugal, is
Europes largest manufacturer of reusable steel gas cylinders, distributed worldwide and
used principally for the storage of cooking and heating gases. AMTROL ALFA also produces
non-returnable gas cylinders supplied to European and Asian customers which are used
principally for the storage of refrigerant gases. AMTROL ALFA provides the Company with a
low-cost international manufacturing base for all of the Companys cylinder products and is
an important source of supply for the Companys international customers. AMTROL Poland Sp z.o.o. (AMTROL Poland), located in Swarzedz, Poland refurbishes
returnable gas cylinders, primarily for the Polish market. AMTROL Poland provides the
Company with both a favorable manufacturing cost structure and close proximity to the gas
cylinder markets in Central and Eastern Europe. Net sales in geographic regions outside of the United States and Canada, primarily Europe,
the Middle East, Africa and the Far East, accounted for 26.1%, 34.7% and 34.2% of the
Companys total net sales in fiscal years 2002, 2003 and 2004, respectively. The Company continues to review potential acquisitions that may represent good strategic
fits with the Companys lines of business. 
 Products And Markets 
 HVAC Products
 The Companys sales to selected sectors of the HVAC market include products such as
expansion accumulators, water heaters and pressure-rated cylinders for heating and
refrigerant gases. The Companys residential HVAC products include expansion vessels for
heated water, potable water heaters and other accessories used in residential HVAC systems.
The Companys commercial HVAC products are substantially identical in function to those used
in residential applications, but may be modified for design codes and the higher operating
pressures of larger systems. The Companys pressure-rated cylinders for refrigerant gases
are used mainly in the storage, transportation and dispensing of gases used principally in
air conditioning and refrigeration systems. In addition, the AMTROL-ALFA facility produces
returnable pressure-rated cylinders for storing gas used in residential and commercial
heating and cooking applications. EXTROLs®.The EXTROL® expansion accumulator, the first of the
Companys products for handling fluid under pressure, redefined the standards for
controlling the expansion of water in hydronic heating systems. Earlier systems consisted
simply of a vessel containing air, resulting in excessive pressure and corrosion. The
Company developed a technology which uses a flexible diaphragm inside a pre-pressurized
vessel to maintain the separation of air and water and has applied this technology in other
HVAC and water system products. This technology controls pressure in the heating system and
minimizes problems related to hot water expansion by allowing the volume of water to
increase as the temperature of the water increases within a closed system, thereby
substantially 4




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reducing operating problems. Therm-X-Trols®.Therm-X-Trols® accumulate expanded hot water from
potable
water heaters where flow back into the public water supply is prohibited due to the presence
of backflow prevention devices. In response to the Clean Water Act of 1984, certain
jurisdictions established local codes to require owners of commercial and residential
buildings to install backflow prevention devices in order to prevent the contamination of
the public water supply. Codes adopted by organizations that set standards for most of the
United States also require a separate device to handle the expanded water and prevent it
from flowing back into the public water supply. The principal alternatives are relief
valves, which permit water to drain inside the building, and thermal expansion accumulators,
such as the Therm-X-Trol®, which capture the water. Therm-X-Trol®
satisfies these code requirements, as well as the codes of certain localities that
specifically require a thermal expansion accumulator. Additionally, certain domestic water
heater manufacturers specify that their warranties are void if thermal expansion
accumulators are not used in conjunction with their products where backflow prevention
devices are installed. Indirect-Fired Water Heaters.In response to market demands for both an abundant supply of
hot water and energy conservation, the Company offers a line of indirect-fired residential
and commercial water heaters, which it manufactures and distributes under the brand name
Boiler Mate. Used in conjunction with a new or existing boiler installed to heat living and
work areas, these water heaters offer an alternative to conventional gas and electric
potable water heaters and tankless coils. Hot water is generated through the use of heat
exchangers and circulators which circulate heated water from the boiler through a coil in
the core of the water heaters reservoir. The Boiler Mate Classic Series, available in 26
and 41 gallon models, is sold primarily for residential applications. The Boiler
Mate Premier Series, a line of stainless steel models, offers sizes
ranging from 60 to 120 gallons for light commercial applications and residential customers
who require large amounts of hot water and rapid recovery time. In addition, the Company,
as a result of continuing communication with key customers and installers, has introduced
several new products. These include the Boiler Mate Top Down Series, the dual-coil for
commercial applications and the Boiler Mate in multiple colors. The Boiler Mate Top Down
Series (41 gallon models) have the heat exchanger and all piping connections placed at the
top for fast installation and easy maintenance. Pressure-Rated Cylinders
 The AMTROL ALFA subsidiary produces and distributes reusable liquid propane gas (LPG)
cylinders and reusable and non-returnable refrigerant cylinders. AMTROL ALFA is the largest
producer of reusable steel gas cylinders in Europe. Reusable LPG cylinders are typically
purchased by major gas companies or their distributors who fill the cylinders for customers
who use the gas for heating and cooking in residential and commercial applications. In
1998, the Company transferred to AMTROL ALFA a non-returnable refrigerant cylinder
production line previously located in Singapore and began supplying its European and
Asian non-returnable refrigerant cylinder customers from AMTROL ALFA. The transfer of this
production line enhanced the Companys worldwide presence in non-returnable cylinder markets
and its ability to provide optimum production and delivery solutions to its major
multi-national customers. The Company is also one of the worlds two largest manufacturers
of non-returnable pressure-rated cylinders used in the storage, transport and dispensing of
refrigerant gases for air conditioning and refrigeration systems. 5




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In 1999, the Company established AMTROL Poland which refurbishes returnable gas cylinders,
primarily for the Polish market. AMTROL Poland provides the
Company with both a favorable manufacturing cost structure and close proximity to the gas
cylinder markets in Central and Eastern Europe. Water Systems Products
 AMTROLs sales of its water systems products consist primarily of water accumulators for
residential and commercial well water systems and products for residential water softening
and purification. Well Water Systems.The Company produces and sells well water accumulators for both
residential and commercial applications under the brand names Well-X-Trol®,
CHAMPION®
and VALUE-WELL, as well as under several other brand and private label
programs. Virtually all of the well water accumulators sold by the Company incorporate an
internally mounted rubber diaphragm that seals an air charge and allows pressure to increase
as water fills the plastic-lined vessel. This design serves to control pressure while
maintaining the separation of air and water in the vessel, thereby eliminating water logging
(absorption of air into water) as well as reducing wear on switches, pump motors and other
system components caused by more frequent on/off cycling. A typical well water system
consists of a submersible or jet pump located in the well that pumps water to an AMTROL well
water accumulator. The well water accumulator is connected to the plumbing system in order to provide water on
demand within a specific range of pressure as controlled by a pressure switch. As the water
level and pressure in the vessel decreases, the diaphragm relaxes and the pressure switch
causes the pump to cycle until a certain pressure is achieved in the system. Water Treatment/Filtration Products.The Company offers a range of products to meet
increasing global demand for improved water quality and water pressure. The Company
manufactures and markets water softeners under the Water Soft brand. Other products such
as reverse osmosis accumulators and related systems distributed by the Company can improve
the quality of both municipal-supplied water and well water. A recent supplement to this
product line is the Odor Oxidizer hydrogen sulfide removal system. This patented system
removes offensive sulfur odor from potable water systems via a proprietary method that uses
no chemicals or media. Due to the success of the Odor Oxidizer application, the Company
has enhanced its product breadth to include the water treatment
removal of iron (ARMOR -
TROL) and arsenic (SORB - TROL). The Company also manufactures and markets products under
the brand name AMTROL Pressuriser® that boosts water pressure where available
pressure is not adequate. 
 Distribution and Marketing 
 The Companys principal channel of distribution is
plumbing, heating and pump specialty wholesalers.
The Company maintains its presence in the United
States and Canadian wholesale markets through a
network of approximately 60 independent
manufacturers representatives arranging sales on a
commission basis, as well as 11 salaried direct
sales professionals. To service its customers with
greater efficiency, the Company has streamlined its
representative network and, through consolidation of
multiple lines of 6




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business, has brought a broader
range of products to its wholesalers. The Company
also provides certain of its products to the retail
channel through its salaried direct sales force. At its Education Center, which is an integral part
of the Companys marketing organization, and at
Company sponsored seminars throughout the United
States and selected international locations, the
Company provides education and training to
wholesalers, contractors and engineers, independent
sales representatives and their employees to assist
them in understanding the technical aspects of their
respective customers requirements and the Companys
product lines. As the Company educates contractors
and engineers about the benefits of the Companys
products, its products are more effectively pulled
through its distribution system. Non-returnable refrigerant pressure-rated cylinders
are sold to major chemical companies, which produce
and package refrigerant gases, and to independent
contractors that purchase bulk refrigerants and fill
the cylinders. The Companys major customers for
reusable refrigerant gas cylinders are wholesale
distributors who sell the products to service
providers and refrigerant recovery equipment
manufacturers. AMTROL ALFAs major customers for
reusable cylinders are major European gas companies
or their distributors. With the exception of one cylinder customer to whom
global sales were approximately 5.6% of total
consolidated net sales, no individual customer
represented more than five percent of the Companys
net sales in 2004. 
 Manufacturing, Raw Materials and Suppliers 
 The Company manufactures its products primarily at its own facilities, many of which depend
on the Companys expertise in low pressure vessel construction. The Company takes advantage
of the material economies and precision inherent in deep-draw stamping technology to
manufacture products of superior performance and life. In 2004, the Company experienced significant price increases for several key raw
materials, energy and freight. Some raw materials such as steel were allocated, which
exacerbated the cost pressures experienced throughout the year. In 2005, the Company
anticipates upward cost pressure in these same categories, but the magnitude of these cost increases is anticipated to decline considerably. The Company
anticipates that mitigating the impact of rising raw material costs and availability issues
will require active management in 2005. Capital expenditures in 2004 yielded significant material utilization and labor content
reductions in nearly all product lines. Emphasis has been placed on low risk, basic
automation, as well as, process and product variation reduction. In addition, productivity
improvement techniques such as Kaizen, Visual Control and One-Piece Flow initiatives will
continue to allow the Company to identify and eliminate waste in its cost structure. During 2004, quality levels continued to improve. Field failures and sales returns
experienced reductions over 2003 attributable to revision of rework policies and stringent
enforcement of supplier quality protocols begun in 2003 that were further enhanced in 2004. Emphasis on safety continues to be the primary focus at all of the Company's locations. During 2004, the
Companys OSHA frequency and severity rates were below industry standards set by the Bureau
of Labor Statistics at each of its four manufacturing locations. Two of the Companys
facilities reported zero lost time injuries while the Rhode Island facility 7




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decreased its
frequency rates by nearly 30% and its severity rates by approximately 50%. The condition at the Companys facilities and capital equipment are considered good.
Capital expenditures in 2004 yielded further productivity improvements. As a
result, the Company does not anticipate any capacity constraints. 
 Seasonality and Backlog 
 Although the Companys sales fluctuate with general economic activity, the effect of
significant economic volatility is mitigated by the fact that many of the Companys markets
are highly replacement oriented. While sales of certain of its products are seasonal in
nature, the Companys overall business is not highly seasonal. Due to the generally short
lead time of its orders, the Company historically has not carried any material backlog. 
 Patents, Trademarks And Licenses 
 While the Company owns a number of
patents, the Company believes that its
position in its markets depends primarily
on factors such as manufacturing
expertise, technological leadership,
superior service and quality and strong
brand name recognition, rather than on
patent protection. The Company believes
that foreign and domestic competitors have
been unable to match the quality of the
Companys branded products. The Company also holds a number of
registered and unregistered trademarks for
its products. The Company believes the
following registered trademarks, which
appear on its products and are widely
recognized in its markets, are among those
of strategic importance to its business:
Well-X-Trol®,
Therm-X-Trol®,
EXTROL®, Boiler Mate,
CHAMPION®and Water
Worker®. 
 Competition 
 The Company experiences competition from a
number of foreign and U.S. competitors in
each of its markets. AMTROL and its
competitors in the water systems products
and HVAC markets compete principally on
the basis of technology, quality, service
and price. 
 Employees 
 As of December 31, 2004, the Company had 569 employees in the United States, none of who
were represented by collective bargaining units. In addition, the Company had 749 employees
in its international operations. Some of the Companys international employees are
represented by a works council. The Company considers relations with its employees to be
good. 
 Environmental Matters 
 Some of the Companys operations generate or have in the past generated waste materials that
are regulated under environmental laws. Based upon the Companys experience in matters that
have been resolved and the amount of hazardous waste shipped to off-site disposal
facilities, the Company believes that any share of costs attributable to it will not be
material should any litigation arise or any claims be made in the future. However, there
can be no assurance that any liability arising from, for example, contamination at
facilities the Company owns or operates or formerly owned or operated (or an entity or
business the Company has acquired or disposed of), or locations at which waste or
contaminants generated by the Company have been deposited (or deposited by 8




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an entity or
business the Company has acquired or disposed of) will not arise or be asserted against the
Company or entities for which the Company may be responsible in a manner that could
materially and adversely affect the Company. The Company monitors and reviews its procedures and policies for compliance with
environmental laws. Based upon the Companys experience to date, the Company operates in
substantial compliance with environmental laws, and the cost of compliance
with existing regulations is not expected to have a material adverse effect on the Companys
results of operations, financial condition or cash flows. However, future events, including
changes in existing laws and regulations or enforcement policies, may give rise to
additional compliance costs which could have a material adverse effect on the Companys
results of operations, financial condition or competitive position. 
 ITEM 2. PROPERTIES The following table sets forth information regarding the Companys principal properties each
of which is owned by the Company unless otherwise indicated: Location
    
    Square Footage
    
    
    Principal Use(approximate)West Warwick, RI
    
    
    270,000
    
    
    Corporate Headquarters,Manufacturing, and Education CenterGuimaraes, Portugal
    
    
    196,000
    
    
    ManufacturingNorth Kingstown, RI (a)
    
    
    143,800
    
    
    Distribution CenterPaducah, KY
    
    
    46,300
    
    
    ManufacturingMansfield, OH (a)
    
    
    45,000
    
    
    Manufacturing and Distribution CenterBaltimore, MD
    
    
    37,000
    
    
    ManufacturingSwarzedz, Poland (a)
    
    
    29,000
    
    
    ManufacturingKitchener, Ontario(a)
    
    
    18,400
    
    
    Sales Office and DistributionTotal
    
    
    785,500
    The Company believes that its properties and equipment generally are well maintained, in
good operating condition and adequate for its present needs. The Company regularly
evaluates its manufacturing requirements and believes that it has sufficient capacity to
meet its current and anticipated future needs. The inability to renew any short-term real
property lease would not have a material adverse effect on the Companys results of
operations, financial condition or competitive position. 
 ITEM 3. LEGAL PROCEEDINGS From time to time, the Company is named as a defendant in legal actions. These legal
actions include commercial disputes, agency proceedings and product liability, personal
injury and other claims. However, management believes, after review of insurance coverage
and consultation with legal counsel, that the ultimate resolution of the current pending
legal actions to which it is a party will not likely have a material adverse effect on the
Companys results of operations, financial condition or cash flows. 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 9




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PART II   
  ITEM 5.
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUERS OF EQUITY
SECURITIES All of the common stock of the Company is owned by Holdings Inc. and no trading
market exists for the stock. All of the common stock of Holdings Inc. is held by
affiliates of Cypress Merchant Banking Partners, L.P. and certain officers,
directors and employees of the Company, and likewise there is no trading market for
Holdings stock. For more information, see Item 12, Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder Matters. 10




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ITEM 6. SELECTED FINANCIAL DATA The selected consolidated financial data presented below for and as of each of the years in the
five-calendar-year period ended December 31, 2004 have been derived from the Consolidated Financial
Statements of the Company, including the related notes thereto (fiscal years 2002 through 2004 have been audited by Ernst and Young). The information set forth below
should be read in conjunction with Managements Discussion and Analysis of Financial Condition and
Results of Operations and with the Consolidated Financial Statements of the Company, including
the related notes thereto, appearing elsewhere in this Form 10-K. Year Ended December 31,2000
    
    
    2001
    
    
    2002
    
    
    2003
    
    
    2004(in thousands)Statement of Operations Data:Net sales
    
    $
    189,490
    
    
    $
    175,096
    
    
    $
    179,416
    
    
    $
    185,046
    
    
    $
    198,394Cost of goods sold
    
    
    142,861
    
    
    
    133,374
    
    
    
    136,556
    
    
    
    144,761
    
    
    
    152,136Gross profit
    
    
    46,629
    
    
    
    41,722
    
    
    
    42,860
    
    
    
    40,285
    
    
    
    46,258Selling, general and
administrative expenses
    
    
    24,468
    
    
    
    25,867
    
    
    
    27,290
    
    
    
    26,702
    
    
    
    28,305Amortization of goodwill
    
    
    4,401
    
    
    
    4,391
    
    
    
    
    
    
    
    
    
    
    
    Income from operations
    
    
    17,760
    
    
    
    11,464
    
    
    
    15,570
    
    
    
    13,583
    
    
    
    17,953Interest expense, net
    
    
    (18,926
    )
    
    
    (18,964
    )
    
    
    (19,867
    )
    
    
    (19,499
    )
    
    
    (21,512
    )Gain (loss) on extinguishment of debt, net
    
    
    
    
    
    
    (584
    )
    
    
    
    
    
    
    6,760
    
    
    
    Other income (expense), net
    
    
    1,758
    
    
    
    372
    
    
    
    (385
    )
    
    
    (100
    )
    
    
    (55
    )Loss from continuing operations before provision
(benefit) for income taxes
    
    
    592
    
    
    
    (7,712
    )
    
    
    (4,682
    )
    
    
    744
    
    
    
    (3,614
    )Provision (benefit) for income taxes
    
    
    2,699
    
    
    
    (1,166
    )
    
    
    774
    
    
    
    1,166
    
    
    
    9,737Loss from continuing operations
    
    
    (2,107
    )
    
    
    (6,546
    )
    
    
    (5,456
    )
    
    
    (422
    )
    
    
    (13,351
    )Loss from discontinued operations
    
    
    (2,039
    )
    
    
    (2,869
    )
    
    
    (5,381
    )
    
    
    (1,310
    )
    
    
    (8,863
    )Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    
    
    
    
    (34,492
    )
    
    
    
    
    
    
    Net loss
    
    $
    (4,146
    )
    
    $
    (9,415
    )
    
    $
    (45,329
    )
    
    $
    (1,732
    )
    
    $
    (22,214
    )Other Data:Depreciation and amortization
    
    $
    13,477
    
    
    $
    12,788
    
    
    $
    8,803
    
    
    $
    9,744
    
    
    $
    8,808Capital expenditures
    
    
    8,277
    
    
    
    3,800
    
    
    
    3,165
    
    
    
    3,249
    
    
    
    6,626Balance Sheet Data (at period end):Working capital (current assets less current liabilities)
    
    $
    5,101
    
    
    $
    8,602
    
    
    $
    7,877
    
    
    $
    27,884
    
    
    $
    22,820Total assets
    
    
    271,104
    
    
    
    264,455
    
    
    
    226,873
    
    
    
    237,023
    
    
    
    228,240Long-term debt, less current maturities
    
    
    159,216
    
    
    
    157,511
    
    
    
    158,391
    
    
    
    167,022
    
    
    
    171,300Shareholders equity (deficit)
    
    
    59,872
    
    
    
    58,219
    
    
    
    15,849
    
    
    
    17,211
    
    
    
    (220
    )
 11




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##### Table of Contents



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section should be read in conjunction with the Consolidated Financial Statements of the
Company and related notes thereto included elsewhere herein. Business Overview 
 AMTROL Inc., together with its subsidiaries (AMTROL or the Company), is a leading
international designer, manufacturer and marketer of expansion and pressure control products
used in water systems applications and selected sectors of the Heating, Ventilation and Air
Conditioning (HVAC) market. The Company is the market leader in the manufacture of its
principal products. The Companys prominence is attributable to the strength of its brand
names, product breadth, quality and innovation, as well as its marketing, distribution and
manufacturing expertise. The Companys two business segments include North America and
Europe. In the North America segment, the Companys principal markets are highly replacement
oriented, with a substantial portion of the Companys core business coming from replacement
sales. Sales can be affected by extreme weather conditions, as well as significant changes
in economic circumstances. During 2004, the Company experienced an increase in net sales
due principally to implemented price increases during the year to offset rising steel costs,
the impact of the strengthening of the Euro against the U.S. Dollar and volume increases.

As a result of the combination of volume, foreign exchange rates and productivity
improvements, the Companys gross profit increased over 2003. During 2004, the Company experienced increasing costs for several key raw materials (steel,
copper, brass and rubber), energy and freight. The Company reacted to these higher raw
material costs by implementing price increases throughout 2004. The Company acted
aggressively to keep these price increases in check by developing new sources and through
contracted purchases. The Company anticipates that mitigating the impact of rising steel
prices and steel availability issues will require continued active management in 2005. Emphasis on productivity improvements continued in 2004 via capital expenditures and
continuous improvement activities such as Kaizen, Visual Control and One-Piece Flow
Initiatives. These techniques allow the Company to identify and eliminate waste in its cost
structure. In addition, management continues to explore and implement strategies in order
to reduce its selling, general and administrative expenses. Forward Looking Statements 
 The Company and its representatives may from time to time make written or oral statements,
including statements contained in AMTROLs filings with the Securities and Exchange
Commission (SEC) and in its reporting to customers, which constitute or contain
forward-looking statements as that term is defined in the Private Securities Litigation
Reform Act of 1995 or the SEC in its rules, regulations and releases. All statements other than statements of historical fact included in this Form 10-K and
elsewhere relating to the Companys financial position, strategic initiatives and statements
addressing industry developments are forward-looking statements. When incorporated in this
discussion, the words expect(s), feel(s), believe(s), anticipate(s) and similar
expressions are intended to identify some of these forward- 12




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##### Table of Contents



looking statements.
Forward looking statements include those containing these phrases but also any other
statements that are not references to historical fact. Although the Company believes that
the expectations reflected in such forward-looking statements are expressed in good faith
and are believed to have a reasonable basis, there can be no assurance that such
expectations or beliefs will result or be achieved or accomplished. Readers are cautioned
not to place undue reliance on these forward-looking statements which speak only as of the
date hereof. The following are some of the important factors that can vary or change or
involve substantial risk and cause actual results to differ materially from such
expectations: the Companys ability to successfully implement its business strategy; the
availability and cost of raw materials; changes in domestic or foreign government regulation
or enforcement policies, particularly related to refrigerant gases or cylinders and building
and energy efficiency requirements or restrictions or limitations or general reduction in
the use of domestic wells; significant weather conditions adverse to the Companys business;
development of competing technologies; acceptance of the Companys existing and planned new
products in international markets; competition in the Companys markets, particularly price
competition; the rate of growth of developing economies and demand for the Companys
products; the ultimate cost of future warranty and other claims relating to the Companys
products and business; whether the Company succeeds in acquiring new businesses;
availability of capital; foreign exchange rates; increases in interest rates; the business
abilities and judgment of personnel; and general economic, financial and business
conditions, both domestically and internationally. Results of Operations 
 Fiscal 2004 Compared to Fiscal 2003 Consolidated Operations The following table sets forth consolidated operating results for the fiscal years indicated: 2004
    
    
    2003% of Net
    
    
    %
    
    
    
    
    
    
    % of NetIn millions of dollars
    
    Actual
    
    
    Sales
    
    
    Change
    
    
    Actual
    
    
    SalesNet sales
    
    $
    198.4
    
    
    
    100.0
    %
    
    
    7.2
    %
    
    $
    185.0
    
    
    
    100.0
    %Cost of goods sold
    
    
    152.1
    
    
    
    76.7
    %
    
    
    5.1
    %
    
    
    144.7
    
    
    
    78.2
    %Gross profit
    
    
    46.3
    
    
    
    23.3
    %
    
    
    14.9
    %
    
    
    40.3
    
    
    
    21.8
    %Selling,
general and administrative expenses
    
    
    28.3
    
    
    
    14.3
    %
    
    
    6.0
    %
    
    
    26.7
    
    
    
    14.4
    %Income from operations
    
    
    18.0
    
    
    
    9.0
    %
    
    
    32.4
    %
    
    
    13.6
    
    
    
    7.4
    %Other income (expense), netInterest expense, net
    
    
    (21.5
    )
    
    
    -10.8
    %
    
    
    10.3
    %
    
    
    (19.5
    )
    
    
    -10.5
    %Gain on
extinguishment of debt, net
    
    
    
    
    
    
    0.0
    %
    
    
    -100
    %
    
    
    6.7
    
    
    
    3.6
    %Other, net
    
    
    (0.1
    )
    
    
    
    %
    
    
    0.0
    %
    
    
    (0.1
    )
    
    
    -0.1
    %Income (loss) before income taxes
    
    
    (3.6
    )
    
    
    -1.8
    %
    
    
    -614.3
    %
    
    
    0.7
    
    
    
    0.4
    %Income tax expense
    
    
    9.7
    
    
    
    4.9
    %
    
    
    781.8
    %
    
    
    1.1
    
    
    
    0.6
    %Loss from
continuing operations
    
    
    (13.3
    )
    
    
    -6.7
    %
    
    
    -3225.0
    %
    
    
    (0.4
    )
    
    
    -0.2
    %Loss from
discontinued operations, net
    
    
    (8.9
    )
    
    
    -4.5
    %
    
    
    -584.6
    %
    
    
    (1.3
    )
    
    
    -0.7
    %Net loss
    
    $
    (22.2
    )
    
    
    -11.2
    %
    
    
    -1205.9
    %
    
    $
    (1.7
    )
    
    
    -0.9
    %
 13




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##### Table of Contents



Fiscal Year Ended December 31, 2004 Compared to Fiscal Year Ended December 31, 2003. Net Sales.Net sales in 2004 increased $13.4 million or 7.2% to $198.4 million from $185.0
million in 2003. In North America, net sales increased $10.7 million or 9.1% as compared to
2003 due principally to implemented price increases during the year to offset rising steel
costs, combined with volume increases. The volume increases were realized from its core product
offering and a variety of new product introductions. Net sales in Europe increased $2.7
million or 4.0% as compared to 2003 due principally to the strengthening of the Euro against the
U.S. dollar, mitigated by a reduction in volume. If the value of the Euro had remained at the
average level of 2003, reported net sales in Europe for 2004 would have decreased $4.0 million
or 5.9% from 2003. Gross Profit.Gross profit increased $6.0 million in 2004 to $46.3 million from $40.3 million
in 2003. As a percentage of net sales, gross profit in 2004 increased to 23.3% from 21.8% in
2003. This increase was due principally to the combination of volume, foreign exchange rates
and productivity improvements discussed above. Selling, General and Administrative Expenses.Selling, general and administrative expenses
increased $1.6 million or 6.0% in 2004 to $28.3 million from $26.7 million in 2003. The
increase was primarily due to accrued performance-based compensation, higher commission expenses
and the strengthening of the Euro versus the U.S. dollar, offset by a decline in expense
attributable to personnel reductions and marketing expenses. Interest Expense.Interest expense
increased $2.1 million in 2004 as compared to 2003. The increase is primarily
attributable to the additional Term B loan and increases in interest rates. Gain on Extinguishment of Debt, Net.The decrease of $6.7 million was principally the result of
a gain of $7.2 million recorded in 2003 on the purchase of $17.2 million of the Companys
outstanding Senior Subordinated Notes offset by a loss of $0.5 million on the extinguishment of
debt for unamortized financing costs associated with the execution of the First Amendment and
Second Amendment to the Loan and Security Agreement and Cypress Agreement. Other Income (Expense), Net.Other income (expense), net for 2004 of $(0.1) million was
unchanged as compared to 2003 of $(0.1) million. Income Taxes.Income tax expense increased $8.6 million in 2004 as compared to 2003. The
Company determined that an increase in the valuation allowance associated with its deferred tax
assets of $8.9 million was required during 2004, as a result of the uncertainty surrounding the future utilization of the net operating loss carryforwards. Net Loss.The net loss in 2004 of $22.2 million compares to a net loss in 2003 of $1.7 million.
The reduction was principally due to increased North America earnings offset by the loss of
$8.9 million incurred on the sale of the discontinued subsidiary in February 2004, the tax
valuation allowance of $8.9 million and the gain of $6.8 million recorded in 2003 on the
extinguishment of a portion of the Companys senior subordinated notes. Segment Operations North America The following table presents a summary of operating results for the fiscal years indicated: 14




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##### Table of Contents



2004
    
    
    2003% of Net
    
    
    %
    
    
    
    
    
    
    % of NetIn millions
    
    Actual
    
    
    Sales
    
    
    Change
    
    
    Actual
    
    
    SalesNet sales
    
    $
    127.8
    
    
    
    100.0
    %
    
    
    9.1
    %
    
    $
    117.1
    
    
    
    100.0
    %Cost of goods sold
    
    
    90.5
    
    
    
    70.8
    %
    
    
    7.2
    %
    
    
    84.4
    
    
    
    72.1
    %Gross profit
    
    
    37.3
    
    
    
    29.2
    %
    
    
    14.1
    %
    
    
    32.7
    
    
    
    27.9
    %Selling, general and
administrative
expenses
    
    
    22.1
    
    
    
    17.3
    %
    
    
    8.9
    %
    
    
    20.3
    
    
    
    17.3
    %Income from operations
    
    $
    15.2
    
    
    
    11.9
    %
    
    
    22.6
    %
    
    $
    12.4
    
    
    
    10.6
    %Units shipped
    
    
    4.92
    
    
    
    
    
    
    
    
    
    
    
    4.91
 In North America, net sales increased $10.7 million or 9.1% as compared to 2003 due principally to
implemented price increases during the year to mitigate rising steel costs combined with volume
increases. The Companys average selling price increased 8.9% in
2004 to $25.98 versus $23.85 as a function of both the implemented
price increases and unit volume increases that reflect a mix shift to
higher value products.
The volume increases were realized from its core product offering and a variety of new product
introductions. Gross profit increased $4.6 million in 2004 to $37.3 million from $32.7 million in
2003. As a percentage of net sales, gross profit in 2004 increased to 29.2% from 27.9% in 2003.
This increase was due principally to the combination of additional volume, better product mix and
productivity improvements totaling $0.7 million. Selling, general and administrative expenses increased
$1.8 million or 8.9% to $22.1 million from $20.3 million in 2003. The increase was primarily due
to accrued performance-based compensation of $1.7 million. Increased commission expenses of $0.5
million resulting from increased sales were offset by a decline in marketing expenses of $0.5 million. Europe The following table presents a summary of operating results for the fiscal years indicated: 2004
    
    
    2003% of Net
    
    
    %
    
    
    
    
    
    
    % of NetIn millions
    
    Actual
    
    
    Sales
    
    
    Change
    
    
    Actual
    
    
    SalesNet sales
    
    $
    70.6
    
    
    
    100.0
    %
    
    
    4.0
    %
    
    $
    67.9
    
    
    
    100.0
    %Cost of goods sold
    
    
    61.6
    
    
    
    87.3
    %
    
    
    2.2
    %
    
    
    60.3
    
    
    
    88.8
    %Gross profit
    
    
    9.0
    
    
    
    12.7
    %
    
    
    18.4
    %
    
    
    7.6
    
    
    
    11.2
    %Selling, general and
administrative
expenses
    
    
    6.2
    
    
    
    8.7
    %
    
    
    -3.1
    %
    
    
    6.4
    
    
    
    9.4
    %Income from operations
    
    $
    2.8
    
    
    
    4.0
    %
    
    
    133.3
    %
    
    $
    1.2
    
    
    
    1.8
    %Units shipped
    
    
    4.00
    
    
    
    
    
    
    
    
    
    
    
    4.38
 In Europe, net sales increased $2.7 million or 4.0% as compared to 2003 due principally to the
strengthening of the Euro against the U.S. dollar offset by a reduction in volume. The Companys
average selling price increased 13.9% in 2004 to $17.65 versus $15.50 due to the
strengthening of the Euro against the U.S. dollar amounting to $1.64
or 76.3% of the change in average selling price and a favorable product mix.
Gross profit increased approximately $1.4 million in 2004 to $9.0 million from $7.6 million in
2003. As a percentage of net sales, gross profit in 2004 increased to 12.7% from 11.2% in 2003.
This increase was due principally to the strengthening of the Euro against the U.S. dollar of $0.8
million and productivity improvements, mitigated by a decrease in units shipped. Selling, general
and administrative expenses decreased $0.2 million or 3.1% to $6.2 million from $6.4 million in
2003. The decrease was primarily due to a decline in depreciation expense of 15




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##### Table of Contents



$0.3 million,
personnel reductions of $0.4 million and commissions of $0.1 million, offset by the strengthening of
the Euro against the U.S. dollar of $0.6 million. Fiscal 2003 Compared to Fiscal 2002 Consolidated Operations The following table sets forth consolidated operating results for the fiscal years indicated: 2003
    
    

2002% of Net
    
    
    %
    
    
    
    
    
    
    % of NetIn millions of dollars
    
    Actual
    
    
    Sales
    
    
    Change
    
    
    Actual
    
    
    SalesNet sales
    
    $
    185.0
    
    
    
    100.0
    %
    
    
    3.1
    %
    
    $
    179.4
    
    
    
    100.0
    %Cost of goods sold
    
    
    144.7
    
    
    
    78.2
    %
    
    
    6.0
    %
    
    
    136.5
    
    
    
    76.1
    %Gross profit
    
    
    40.3
    
    
    
    21.8
    %
    
    
    -6.1
    %
    
    
    42.9
    
    
    
    23.9
    %Selling, general and administrative
expenses
    
    
    26.7
    
    
    
    14.4
    %
    
    
    -2.2
    %
    
    
    27.3
    
    
    
    15.2
    %Income from operations
    
    
    13.6
    
    
    
    7.4
    %
    
    
    -12.8
    %
    
    
    15.6
    
    
    
    8.7
    %Other income (expense), netInterest expense, net
    
    
    (19.5
    )
    
    
    -10.5
    %
    
    
    2.0
    %
    
    
    (19.9
    )
    
    
    -11.1
    %Gain on extinguishment of debt, net
    
    
    6.7
    
    
    
    3.6
    %
    
    
    100.0
    %
    
    
    
    
    
    
    Other, net
    
    
    (0.1
    )
    
    
    -0.1
    %
    
    
    66.7
    %
    
    
    (0.3
    )
    
    
    -0.2
    %Income (loss) before income taxes
    
    
    0.7
    
    
    
    0.4
    %
    
    
    115.2
    %
    
    
    (4.6
    )
    
    
    -2.6
    %Income tax expense
    
    
    1.1
    
    
    
    0.6
    %
    
    
    37.5
    %
    
    
    0.8
    
    
    
    0.4
    %Loss from continuing operations
    
    
    (0.4
    )
    
    
    -0.2
    %
    
    
    92.6
    %
    
    
    (5.4
    )
    
    
    -3.0
    %Loss from discontinued operations, net
    
    
    (1.3
    )
    
    
    -0.7
    %
    
    
    27.8
    %
    
    
    (5.4
    )
    
    
    -3.0
    %Cumulative effect of a change in
accounting principle
    
    
    
    
    
    
    
    
    
    
    100.0
    %
    
    
    (34.5
    )
    
    
    -19.3
    %Net loss
    
    $
    (1.7
    )
    
    
    -0.9
    %
    
    
    96.2
    %
    
    $
    (45.3
    )
    
    
    -25.3
    %
 Fiscal Year Ended December 31, 2003 Compared to Fiscal Year Ended December 31, 2002. Net Sales.Net sales in 2003 increased $5.7 million or 3.2% to $185.1 million from $179.4
million in 2002. In North America, net sales decreased $5.2 million or 4.3% as compared to 2002
due principally to a decline in well drilling caused by above average rainfall and flooding in
the mid-Atlantic and Midwestern regions of the U.S., and a decline in cylinder sales as a result
of a temporary shut-down at a major customers facility. Net sales in Europe increased $10.8
million or 18.9% as compared to 2002 due principally to the strengthening of the Euro against
the U.S. dollar. Gross Profit.Gross profit decreased approximately $2.6 million in 2003 to $40.3 million from
$42.9 million in 2002. As a percentage of net sales, gross profit in 2003 decreased to 21.8%
from 23.9% in 2002. This decrease was due principally to the higher proportion of net sales
from the Companys European operations which have lower gross profit
margins and increased steel costs in North America and Europe. Selling, General and Administrative Expenses.Selling, general and administrative expenses
decreased $0.6 million or 2.2% in 2003 to $26.7 million from $27.3 million in 2002. The
strengthening of the Euro versus the U.S. dollar in 2003 largely offset a decline in expense
attributable to certain one-time compensation costs incurred during the second quarter of 2002
of $0.8 million. 16




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##### Table of Contents



Interest Expense.Interest
expense decreased $0.4 million in 2003 as compared to 2002. The decrease is primarily attributable to the purchase of a portion of the Company's
outstanding senior subordinated notes during 2003. Gain on Extinguishment of Debt, Net.The increase of $6.7 million was principally the result of
a gain of $7.2 million recorded on the purchase of $17.2 million of the Companys outstanding
Senior Subordinated Notes offset by a loss of $0.5 million on the extinguishment of debt for
unamortized financing costs associated with the execution of the First Amendment and Second
Amendment to the Loan and Security Agreement and Cypress Agreement. Other, Net.Other expense, net for 2003 was $0.1 million as compared to 2002 of $0.4 million.
The improvement of $0.3 million was principally attributable to the reduction in currency
exchange losses of $0.7 million offset by reduced grant income in 2003 versus 2002 of $0.5
million. Income Taxes.Income tax expense increased $0.4 million in 2003 as compared to 2002 reflecting
increased withholding taxes paid by the Companys Europe segment. During 2002, management
decided to discontinue the recognition of tax benefits associated with pre-tax losses from the
Companys U.S. operations. Net deferred tax assets recognized on the Companys balance sheet
continue to require managements evaluation as to their realization. Although realization is
not assured, management believes it is more likely than not that the net deferred tax assets
will be realized. The amount expected to be realized is based upon estimates derived from tax
planning strategies which the Company believes are currently prudent and feasible. A valuation
allowance has been provided for certain net operating loss carryforwards as it is more likely
than not that the related deferred tax assets for these carryforwards will not be realized. The
total change in valuation allowance was a $3.6 million increase for the year December 31, 2002,
and a $1.0 million increase for the year December 31, 2003. Net Loss.The net loss in 2003 of $1.7 million compares to a net loss in 2002 of $45.3 million.
The reduction was principally due to the goodwill impairment charge of $38.1 million recorded
in 2002 combined with a gain of $7.2 million recorded in 2003 on the extinguishment of a portion
of the Companys senior subordinated notes. Segment Operations North America The following table presents a summary of operating results for the fiscal years indicated: 2003
    
    
    2002% of Net
    
    
    %
    
    
    
    
    
    
    % of NetIn millions
    
    Actual
    
    
    Sales
    
    
    Change
    
    
    Actual
    
    
    SalesNet sales
    
    $
    117.1
    
    
    
    100.0
    %
    
    
    -4.3
    %
    
    $
    122.3
    
    
    
    100.0
    %Cost of goods sold
    
    
    84.4
    
    
    
    72.1
    %
    
    
    -4.4
    %
    
    
    88.3
    
    
    
    72.2
    %Gross profit
    
    
    32.7
    
    
    
    27.9
    %
    
    
    -3.8
    %
    
    
    34.0
    
    
    
    27.8
    %Selling, general and
administrative
expenses
    
    
    20.3
    
    
    
    17.3
    %
    
    
    -6.9
    %
    
    
    21.8
    
    
    
    17.8
    %Income from operations
    
    $
    12.4
    
    
    
    10.6
    %
    
    
    1.6
    %
    
    $
    12.2
    
    
    
    10.0
    %Units shipped
    
    
    4.91
    
    
    
    
    
    
    
    
    
    
    
    5.13
 In North America, net sales decreased $5.2 million or 4.3% as compared to 2002 due principally to a
decline in well drilling caused by above average rainfall and flooding in the mid-Atlantic and
Midwestern regions of the U.S., and a decline in cylinder sales as a result of a temporary 17




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##### Table of Contents



shut-down at a major customers facility. The Companys average selling price remained stable at
$23.85 versus $23.84 in 2002. Gross profit decreased $1.3 million in 2003 to $32.7 million from
$34.0 million in 2002. As a percentage of net sales, gross profit in 2003 increased to 27.9% from
27.8% in 2002. This increase was due principally to lower revenues offset by productivity
improvements. Selling, general and administrative expenses decreased $1.5 million or 6.9% to $20.3
million from $21.8 million in 2002. The decrease was primarily attributable to certain one-time
compensation costs incurred during the second quarter of 2002 of $0.8 million, lower commissions
and $0.2 million and personnel reductions of $0.8 million in 2003. Europe The following table presents a summary of operating results for the fiscal years indicated: 2003
    
    
    2002% of Net
    
    
    %
    
    
    
    
    
    
    % of NetIn millions
    
    Actual
    
    
    Sales
    
    
    Change
    
    
    Actual
    
    
    SalesNet sales
    
    $
    67.9
    
    
    
    100.0
    %
    
    
    18.9
    %
    
    $
    57.1
    
    
    
    100.0
    %Cost of goods sold
    
    
    60.3
    
    
    
    88.8
    %
    
    
    25.1
    %
    
    
    48.2
    
    
    
    84.4
    %Gross profit
    
    
    7.6
    
    
    
    11.2
    %
    
    
    -14.6
    %
    
    
    8.9
    
    
    
    15.6
    %Selling, general and
administrative
expenses
    
    
    6.4
    
    
    
    9.4
    %
    
    
    16.4
    %
    
    
    5.5
    
    
    
    9.6
    %Income from operations
    
    $
    1.2
    
    
    
    1.8
    %
    
    
    -64.7
    %
    
    $
    3.4
    
    
    
    6.0
    %Units shipped
    
    
    4.38
    
    
    
    
    
    
    
    
    
    
    
    4.54
 In Europe, net sales increased $10.8 million or 18.9% as compared to 2002 due principally to the
strengthening of the Euro against the U.S. dollar. The Companys average selling price increased
23.2% in 2003 to $15.50 versus $12.58 due to the strengthening of the Euro against the U.S. dollar
($2.37 or 80.3%) and a favorable product mix. Gross profit decreased approximately $1.3 million in
2003 to $7.6 million from $8.9 million in 2002. As a percentage of net sales, gross profit in 2003
decreased to 11.2% from 15.6% in 2002. This decrease was due principally to rising steel costs
partially offset by favorable product mix. Selling, general and administrative expenses increased
$0.9 million or 16.4% to $6.4 million from $5.5 million in 2002. The increase was primarily due to
the strengthening of the Euro against the U.S. dollar of $1.0 million. Liquidity and Capital Resources 
 The Company is a party to two credit facilities: a $52.5 million senior first-priority
secured credit facility arranged by Foothill Capital Corporation (as
amended, the Foothill Facility)
and a $35.0 million senior second-priority secured credit facility with affiliates of The
Cypress Group LLC (as amended, the Cypress Facility). The Foothill Facility provides the Company (i) a term loan facility consisting of a
five-year Term A Loan maturing in December 2006, with an outstanding principal amount of
$5.5 million at December 31, 2004, bearing cash interest at Wells Fargo Reference Rate
(approximating the prime rate) plus 0.75% (6.00% at December 31, 2004), and a five-year Term
B Loan maturing December 2006, with an outstanding principal amount of 18




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$19.8 million as of
December 31, 2004, bearing cash interest at the Wells Fargo Reference Rate plus 3.5%, and
paid-in-kind (PIK) interest at 3.5% (12.25% at December 31, 2004) (collectively the Term
Loans) and (ii) a five-year Revolving Credit Facility maturing December 2006, bearing
interest at Wells Fargo Reference Rate plus 0.5% (5.75% at December 31, 2004), providing
the lesser of (a) $30.0 million less the aggregate outstanding principal amount of the Term
A Loan less letter of credit usage and (b) borrowing base less letter of credit usage. At
December 31, 2004, total availability and aggregate borrowings under the Revolving Credit
Facility were $11.5 million and $5.2 million, respectively. On December 22, 2004, the Company amended its Foothill Facility by entering into the Second
Amendment to Loan and Security Agreement (the Foothill Second Amendment). This Foothill
Second Amendment extended the maturity date of the Term B Loan to December 21, 2006. The
Foothill Second Amendment did not affect the maturity dates of the Revolving Credit
Facility, Term A Loan or the Cypress Facility and did not revise any covenants. The Cypress Facility consists of term loans totaling $35.0 million (the Term C Loan). The
Term C Loan, with an outstanding principal amount of $45.9 million (includes PIK interest of
$10.9 million) as of December 31, 2004, has a maturity date of December 26, 2006, and bears
PIK interest fixed at 12% per annum paid quarterly, which at the lenders option can be paid
in common stock of the Company. In addition, 60,000 warrants with an exercise price of
$0.01 were issued under the Cypress Facility. The Company expects that the effective
interest rate will be greater than 12% given the additional interest expense associated with
the warrants. The Foothill Facility and Cypress Facility contain certain affirmative and negative
covenants and restrictions. As of December 31, 2004, the Company was in compliance with all
of these covenants and restrictions. As of December 31, 2004, the Companys operating capital (defined as accounts receivable and
inventory, less accounts payable) increased $8.6 million from $29.0 million at December 31,
2003 to $37.6 million. Accounts receivable, inventories and accounts payable increased $2.7
million, $6.3 million and $0.4 million, respectively. The increase in accounts receivable was due principally to higher sales levels, the impact
of the strengthening Euro on the translation of the Companys European operations, offset by
improved collections at all operating units. The Company did not experience any significant
changes in credit terms, credit utilization or delinquency in accounts receivable in 2004 as
compared to 2003. The increase in inventories was due principally to new product introductions, higher sales
levels and the impact of the strengthening Euro on the translation of the Companys European
operations. In addition, the Company revalued its inventory as a result of rising steel
prices. The increase in accounts payable was due principally to the impact of the strengthening Euro
on the translation of the Companys European operations and the timing of vendor payments. Net cash
provided by operating activities in 2004 of $7.4 million
increased $4.3 million as compared to 2003 of $3.1 million. The change was due principally to
increased operating income (income from operations less interest expense and other
income/(expense)) and less cash interest payments. Cash provided by financing activities decreased $14.0 million 19




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principally due to the additional Term B Loan issuance of $15 million in 2003. Capital expenditures were $3.2 million, $3.2 million and $6.6 million for the years ended
December 31, 2002, 2003 and 2004, respectively. Substantially all of the expenditures in
2002 and 2003 related to ongoing maintenance and upgrading of the Companys manufacturing
technology at all of its production facilities. 2004 maintenance and
upgrading expenditures were comparable to prior periods with the
balance of the increase related to
productivity improvement initiatives. In November 1996, the Company issued, under a Note Indenture Agreement (the Agreement),
$115.0 million of Senior Subordinated Notes due 2006 (the Notes) of which $97.8 million
was outstanding as of December 31, 2004. The Notes are unsecured obligations of the Company.
The Notes bear interest at the rate of 10.625% per annum payable semi-annually on each June
30 and December 31. The Notes are redeemable at the option of the Company on or after
December 31, 2004, in whole or in part, at par. Upon a Change of Control (as defined in
the Indenture), each Note holder has the right to require the Company to repurchase such
holders Notes at a purchase price of 101% of the principal amount plus accrued interest.
The Notes Indenture contains certain affirmative and negative covenants and restrictions.
As of December 31, 2004, the Company is in compliance with the various covenants. During 2003, the Company purchased a portion of the Notes with a face value of $17.2 million
from The Cypress Group, LLC (Cypress). The purchase was facilitated by Cypress and
financed through the issuance of additional Term C debt of $10.0 million. The
extinguishment resulted in a gain of $7.2 million that was included in Gain on
extinguishment of debt, net in the Companys Consolidated Statement of Operations. The
Company and/or affiliates of the Company, including entities related to Cypress may
continue, from time to time, to purchase the Notes previously issued by the Company in the
open market or by other means. The following table represents the Companys contractual obligations for future payments: (in thousands)Payments due by period as of December 31, 2004Less than 1
    
    
    
    
    
    
    4 - 5
    
    
    Over 5Total
    
    
    Year
    
    
    1 - 3 Years
    
    
    Years
    
    
    YearsShort-term debt
    
    $
    10,774
    
    
    $
    10,774
    
    
    $
    
    
    
    $
    
    
    
    $
    Long-term debt
    
    
    174,257
    
    
    
    2,957
    
    
    
    171,300
    
    
    
    
    
    
    
    Interest Expense
    
    
    43,101
    
    
    
    21,258
    
    
    
    21,843
    
    
    
    
    
    
    
    Operating leases
    
    
    2,094
    
    
    
    753
    
    
    
    1,279
    
    
    
    62
    
    
    
    Deferred pension
    
    
    1,665
    
    
    
    229
    
    
    
    689
    
    
    
    459
    
    
    
    288Forward contracts
    
    
    732
    
    
    
    732
    
    
    
    
    
    
    
    
    
    
    
    Raw materials, etc.
    
    
    333
    
    
    
    333
    
    
    
    
    
    
    
    
    
    
    
    $
    232,956
    
    
    $
    37,036
    
    
    $
    195,111
    
    
    $
    521
    
    
    $
    288
 The Company intends to fund its future working capital, capital expenditures and debt
service requirements with cash flow from operations, cash and cash equivalents and
borrowings under the Foothill Facility. 20




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Management
believes that cash generated from these resources will be sufficient to meet the Companys working capital and capital
expenditure needs for the foreseeable future. The Company may consider other
options available to it in connection with funding future working capital and capital
expenditure needs, including the issuance of additional debt and equity securities. The Company anticipates being able to refinance its senior secured debt and senior
subordinated notes which mature in 2006. When appropriate, the Company currently
anticipates refinancing the senior secured debt with its existing lenders or other sources
and expects to seek additional unsecured debt to cover the maturing senior subordinated
notes. However, there can be no assurances that the Company will be able to refinance the
maturing debt. The Company will continue to selectively pursue strategic acquisitions. The Company
believes that strategic acquisitions, both domestic and international, provide an effective
means of increasing or establishing a market presence in targeted markets and a means of
identifying and introducing new products and technologies in markets where it already has a
strong presence. The Company also believes that establishing local manufacturing and
distribution facilities in international markets significantly enhances its ability to build
strong customer relationships, understand local product preferences and be price
competitive. The Company believes that anticipated inflation rates will not have a material adverse
effect on its results of operations or financial condition. However, there can be no
assurance that sharply increasing raw material or fuel costs will not adversely affect the
Companys financial condition or results of operations. In December 2004, Financial Accounting Standards Board (FASB) issued SFAS No. 123(R)
(revised 2004), Share-Based Payment, which is a revision of SFAS No. 123, Accounting for
Stock-Based Compensation.SFAS No. 123(R) supersedes APB Opinion No. 25, Accounting for
Stock Issued to Employees, and amends SFAS No. 95, Statement of Cash Flows.SFAS No.
123(R) requires all share-based payments to employees, including grants of employee stock
options, to be recognized in the income statement based on their fair values. The new
standard will be effective for the Company in the quarter beginning July 1, 2005. The
adoption of this standard is not expected to have a material impact on the Companys overall
financial position and results of operations. In November 2004, the FASB issued SFAS No. 151, Inventory Costs  an amendment of ARB No.
43.SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning
after June 15, 2005. This Statement amends the guidance in ARB No. 43, Chapter 4,
Inventory Pricing,to clarify the accounting for abnormal amounts of idle facility
expense, freight, handling costs, and wasted material (spoilage). This Statement requires
that those items be recognized as current-period charges regardless of whether they meet the
criterion of so abnormal. In addition, this Statement requires that allocation of fixed
production overheads to the costs of conversion be based on the normal capacity of the
production facilities. The adoption of this standard is not expected to have a material
impact on the Companys overall financial position and results of operations. In January 2003, the FASB issued Interpretation 46, Consolidation of Variable Interest
Entities, an Interpretation of ARB No. 51(Interpretation 46). In December 2003, the FASB
issued a revision to Interpretation 46 to make certain technical corrections and address
certain implementation issues that had arisen. Interpretation 46, as revised, 21




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provides a new framework for identifying variable interest entities (VIEs) and determining when a company
should include the assets, liabilities, noncontrolling interests and results
of activities of a VIE in its consolidated financial statements. Interpretation 46 was
effective immediately for VIEs created after January 31, 2003. The provisions of
Interpretation 46, as revised, will be adopted by the Company in 2005. The adoption of this
Interpretation is not expected to have a material impact on the Companys overall financial
position and results of operations. Critical Accounting Policies 
 Certain of the Companys accounting policies require the application of judgment in
selecting the appropriate assumptions for calculating financial estimates. By their nature,
these judgments are subject to an inherent degree of uncertainty. The Company periodically
evaluates the judgments and estimates used for its critical accounting policies to ensure
that such judgments and estimates are reasonable for its interim and year-end reporting
requirements. These judgments and estimates are based on the Companys historical
experience, current trends and information available from other sources, as appropriate. If
different conditions result from those assumptions used in the Companys judgments, the
results could be materially different from the Companys estimates. The Companys critical
accounting policies include: Goodwill and Other Long-Lived Assets The Company accounts for acquired goodwill and goodwill impairment in accordance with SFAS
No. 142 Goodwill and Other Intangible Assets(SFAS No. 142). This pronouncement
requires considerable judgment and, where necessary, the Company utilizes appraisals to
assist in the Companys valuation of acquired goodwill and evaluation of goodwill
impairment. The Company has selected December 31 as its annual review date and primarily
utilizes a discounted cash flow approach in order to value the Companys operating segments
required to be tested for impairment by SFAS No. 142. SFAS No. 142 requires that the
Company forecast future cash flows of the operating segments and discount the cash flow
stream based upon a weighted average cost of capital that is derived from comparable
companies within similar industries. The discounted cash flow calculations also include a
terminal value calculation that is based upon an expected long-term growth rate for the
applicable operating segment. The Company believes that its procedures for applying the
discounted cash flow methodology, including the estimates of future cash flows, the weighted
average cost of capital and the long-term growth rate, are reasonable and consistent with
market conditions at the time of the valuation. In accordance
with SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets(SFAS
No. 144), the Company has evaluated the realizability of
non-goodwill long-lived assets, which primarily consist of property,
plant and equipment and intangible assets, based on expectations of
the non-discounted future cash flows for each subsidiary having a
material amount of these assets. If the sum of the expected
non-discounted future cash flows is less than the carrying amount of
all assets, the Company would recognize an impairment loss. The Companys cash flow estimates are
based upon historical cash flows, as well as future projected cash flows received from
subsidiary management in connection with the annual Company wide planning process, and
include a terminal valuation for the applicable subsidiary based upon a multiple of earnings
before interest expense, taxes and depreciation and amortization expense (EBITDA). The
Company estimates the EBITDA multiple by reviewing comparable company information and other
industry data. The Company believes that its procedures for estimating gross future cash 22




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flows, including the terminal valuation, are reasonable and consistent with current market
conditions. Based on its most recent analysis, the Company believes
that no material impairment exists at December 31, 2004. Revenue Recognition In accordance with SEC Staff Accounting Bulletin (SAB) No. 104, the Company recognizes
revenue only when there is a valid contract or purchase order which includes a fixed price,
the goods have been delivered in accordance with the shipping terms; and there is an
expectation that the collection of the revenue is reasonably assured. Determination of the
criteria is based upon managements judgments regarding the fixed nature of the price and
the ability to collect revenue. Allowances for cash discounts, volume rebates, and other customer incentive programs, as
well as gross customer returns, among others, are recorded as a reduction of sales at the
time of sale based upon the estimated future outcome. Cash discounts, volume rebates and
other customer incentive programs are based upon certain percentages agreed to with the
Companys various customers, which are typically earned by the customer over an annual
period. The Company records periodic estimates for these amounts based upon the historical
results to date, estimated future results through the end of the contract period and the
contractual provisions of the customer agreements. For calendar year customer agreements,
the Company is able to adjust its periodic estimates to actual amounts as of December 31
each year based upon the contractual provisions of the customer agreements. As a result, at
the end of any given reporting period, the amounts recorded for these allowances are based
upon estimates of the likely outcome of future sales with the applicable customers and may
require adjustment in the future if the actual outcome differs. The Company believes that
its procedures for estimating such amounts are reasonable and historically have not resulted
in material adjustments in subsequent periods when the estimates are adjusted to the actual
amounts. Provisions for the estimated costs for future product warranty claims and bad debts are
recorded as a reduction to revenue and selling, general and administrative expense,
respectively, at the time a sale is recorded. The amounts recorded are generally based upon
historically derived percentages while also factoring in any new business conditions that
might impact the historical analysis such as new product introduction for warranty and
bankruptcies of particular customers for bad debts. The Company also periodically evaluates
the adequacy of its reserves for warranty and bad debts recorded in its consolidated balance
sheet as a further test to ensure the adequacy of the recorded provisions. Warranty claims
can extend far into the future and bad debt analysis often involves subjective analysis of a
particular customers ability to pay. As a result, significant judgment is required by the
Company in determining the appropriate amounts to record and such judgments may prove to be
incorrect in the future. The Company believes that its procedures for estimating such
amounts are reasonable and historically have not resulted in material adjustments in
subsequent periods when the estimates are adjusted to the actual amounts. Inventory Valuation The Companys inventories are stated at the lower of cost or market including material,
labor and manufacturing overhead. The Company records provisions, as appropriate, to
write-down obsolete and excess inventory to estimated net realizable value. The process for
evaluating obsolete and excess inventory often requires the Company to make subjective
judgments and estimates concerning future sales levels, quantities and 23




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##### Table of Contents



prices at which such
inventory will be able to be sold in the normal course of business. Accelerating the
disposal process or incorrect estimates of future sales potential may cause the actual
results to differ from the estimates at the time such inventory is disposed or sold. The
Company believes that its procedures for estimating such amounts are
reasonable and historically have not resulted in material adjustments in subsequent periods
when the estimates are adjusted to the actual amounts. Income Taxes The Company accounts for income taxes using the liability method in accordance with SFAS No.
109 Accounting for Income Taxes(SFAS No. 109), which requires that the deferred tax
consequences of temporary differences between the amounts recorded in the Companys
Consolidated Financial Statements and the amounts included in the Companys federal and
state income tax returns be recognized in the balance sheet. As the Company generally does
not file their income tax returns until well after the closing process for the December 31
financial statements is complete, the amounts recorded at December 31 reflect estimates of
what the final amounts will be when the actual income tax returns are filed for that fiscal
year. In addition, estimates are often required with respect to, among other things, the
appropriate state income tax rates to use in the various states that the Company and its
subsidiaries are required to file, the potential utilization of operating and capital loss
carry-forwards for both federal and state income tax purposes and valuation allowances
required, if any, for tax assets that may not be realizable in the future. SFAS No. 109
requires balance sheet classification of current and long-term deferred income tax assets
and liabilities based upon the classification of the underlying asset or liability that
gives rise to a temporary difference. The Company has increased the valuation allowance for
certain deferred tax assets related to net operating loss carryforwards. The increase
results from a reassessment by management of the timing and likelihood of certain
prospective events central to managements tax planning strategies, consistent with the
requirements of SFAS No. 109. The net operating loss carryforwards are long-term in nature
and management may reduce the valuation allowance if its assessment of the timing and
likelihood of these prospective events changes. The income tax estimates used have
historically not resulted in material adjustments to income tax expense in subsequent
periods when the estimates are adjusted to the actual filed tax return amounts, although
there may be reclassifications between the current and long-term portion of the deferred tax
accounts. The Company is subject to the examinations of its income tax returns by the Internal Revenue
Service and other tax authorities. The Company evaluates the likelihood of unfavorable
adjustments arising from the examinations and believes adequate provisions have been made in
the income tax provision. Contingencies The Company is subject to contingencies, including legal proceedings and claims arising out
of its businesses that cover a wide range of matters, including, among others, environmental
matters, contract and employment claims, workers compensation claims, product liability and
warranty. The Company provides accruals for direct costs associated with the estimated resolution of
contingencies at the earliest date at which it is deemed probable that a liability has been
incurred and the amount of such liability can be reasonably estimated. Costs accrued have
been estimated and are based upon an analysis of potential results. 24




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##### Table of Contents



While it is impossible to ascertain the ultimate legal and financial liability with respect
to contingent liabilities, including lawsuits, the Company believes that the aggregate
amount of such liabilities, if any, in excess of amounts provided or covered by insurance,
will not have a material adverse effect on the consolidated financial position or results of
operations of the Company. It is possible, however, that future results of operations for
any particular future period could be materially affected by changes in our assumptions or
strategies related to these contingencies or changes out of the Companys control. 
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK Foreign Currency Risk The Company is exposed to market risk related to foreign currency exchange rates.
Portions of revenues in 2004 from the Companys Portuguese operations were denominated in
U.S. dollars and British Pounds. As a result of the strengthening of the Euro versus the
U.S. dollar by 8.7% in 2004, the Company recorded approximately $0.1 million in foreign
exchange losses in 2004 as the corresponding receivables lost value. During 2004, the
Company did use forward contracts, which are generally three months in duration, to hedge
its foreign currency exposures. At December 31, 2004, the Companys Portuguese operations
had forward contracts for the purchase of $250,000 and £250,000 with maturity dates through
February 2005. The value of these forward contracts was immaterial to the balance sheet of
AMTROL. The Company believes that by the continued use of forward contracts in 2005, no
material foreign currency exchange losses will be incurred. Interest Rate Market Risk With respect to fluctuating interest rates, the impact on 2004 operating results was not
material and the expected impact on 2005 operating results is not anticipated to be
material. The following sensitivity analysis summarizes the potential impact on the Company of
additional interest expense resulting from a hypothetical 100 basis point increase in the
interest rate indices upon which AMTROLs floating rate debt instruments are based
(000s): Year End 2004Exposure to
    
    
    Hypothetical
    
    
    Effect onVariable
    
    Interest
    
    
    Change in
    
    
    AmtrolRate Debt
    
    Rate Risk
    
    
    Rate Index
    
    
    InterestRevolver
    
    $
    5,201
    
    
    100 bps
    
    $
    52Term A Loan
    
    
    5,548
    
    
    100 bps
    
    
    55Term B Loan
    
    
    19,799
    
    
    100 bps
    
    
    198$
    30,548
    
    
    100 bps
    
    $
    305
 25




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##### Table of Contents



The Company believes that the potential effects of a hypothetical 100-basis point
increase in its floating rate debt instruments are not material to cash flows or net income. The Companys Term C Loan and Senior Subordinated Notes are not subject to interest rate
risk since the rate of interest on these securities is fixed until their respective
maturities. Commodity Risk The Company is subject to market risk with respect to the pricing of its principal raw
materials (steel, rubber, corrugate and paint) and utilities. If prices of these raw
materials and utilities were to increase dramatically, the Company might not be able to pass
such increases on to its customers and, as a result, gross margins could decline. The
Company manages its exposure to commodity pricing risk by continuing to diversify its
product mix, strategic buying programs and vendor partnering. At December 31, 2004, the
Company had not entered into any derivative financial instruments to manage its exposure to
higher prices. 
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The
Financial Statements are included in a separate section beginning on page 37 of
this report. 
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 
 ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures As of the end of the period covered by this report, the Company, under the supervision and
with the participation of its management, including its principal executive officer and
principal financial officer, performed an evaluation of the Companys disclosure controls
and procedures, as required by Securities Exchange Act Rule 13a-15. Based on that
evaluation, the Companys principal executive officer and principal financial officer
concluded that such disclosure controls and procedures are effective to ensure that material
information relating to the Company, including its consolidated subsidiaries, is made known
to them, particularly during the period for which the periodic reports are being prepared. Changes in Internal Controls There have been no significant changes in internal control over financial reporting that
occurred during the fourth quarter of 2004, that have materially affected, or are reasonably
likely to materially affect, the Companys internal control over financial reporting. 26




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##### Table of Contents



ITEM 9B. OTHER INFORMATION The Company
entered into agreements with three key executives during the fourth
quarter of 2004 that would be triggered in the event of a
Change of Control of the Company. In addition, the Company
entered into Change of
Control Agreements with four executives during the fourth quarter of
2004 that would be triggered in the event of a Change in
Control of the Company and certain other facts set forth therein.
These agreements have been filed as exhibits within this
Form 10-K under material contracts. In addition,
AMTROL Holdings Inc. and Amtrol Inc. entered into Indemnification and
Advancement of Expenses Agreements (the Indemnification
Agreements) with its respective Board of Directors during the
fourth quarter of 2004. The Indemnification Agreements stipulate that
AMTROL Holdings Inc. and Amtrol Inc. will indemnify their respective
Board of Directors to the fullest extent permitted by the General
Corporation Law of the State of Delaware (AMTROL Holdings Inc.) and
the Rhode Island Business Corporation Act (Amtrol Inc.) should they
be or are threatened to be made a party, witness or other participant
in any threatened, pending or completed action, suit, proceeding or
alternative dispute resolution related to their position or actions as
a director
of the above companies. The
Indemnification Agreements related to the individual companies listed
above were signed by all members of the respective Board of Directors
and a form of the Indemnification Agreements is attached as exhibits
to this Annual Report. Effective
December 30, 2004, Director Andrew M. Massimilla resigned
his director position with AMTROL Holdings Inc. and Amtrol Inc. Mr.
Massimilla also resigned his post on the Companys Executive
Committee. Mr. Massimilla did not resign as a result of a disagreement
with the Company. 27




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##### Table of Contents



PART III  
 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth certain information regarding each of the directors and executive
officers of the Company: Name
    
    Age
    
    PositionAlbert D. Indelicato
    
    
    54
    
    
    President, Chairman of
the Board, Chief
Executive Officer and
DirectorLarry T. Guillemette
    
    
    49
    
    
    Executive Vice
President, Chief
Financial Officer and
TreasurerJoseph L. DePaula
    
    
    50
    
    
    Vice President-Finance
& Corporate ControllerPatricia A. Pickrel
    
    
    54
    
    
    SecretaryJohn P. Cashman
    
    
    64
    
    
    DirectorDavid P. Spalding
    
    
    50
    
    
    DirectorJames A. Stern
    
    
    54
    
    
    DirectorGerald Willinger
    
    
    37
    
    
    Director
 Albert D. Indelicato became President, Chairman of the Board and Chief Executive Officer in June
2000. Previously, Mr. Indelicato served as President and Chief Executive Officer since joining the
Company in July 1998. From 1996 to 1998, he was President of Litorale Holdings, Inc., a consulting
firm specializing in acquisitions. From 1970 to 1996, Mr. Indelicato served in various managerial
capacities of Power Control Technologies and its predecessor companies, including most recently as
Chief Executive Officer and Director. Larry T. Guillemette became Executive Vice President, Chief Financial Officer and Treasurer in
August 2000. Previously, Mr. Guillemette served as Executive Vice President-Marketing and Business
Development since joining the Company in 1998. From 1991 to 1998, Mr. Guillemette was President
and Chief Executive Officer of Balcrank Products, Inc. Joseph L. DePaula became Vice President-Finance & Corporate Controller in April 2001. For the
previous five-year period thereto, Mr. DePaula served as Chief Financial Officer of Semi-Alloys Co. Patricia A. Pickrel, Secretary joined the Company as General Counsel in 1998 and became Secretary
in 1999. Previously, Ms. Pickrel was engaged in the private practice of law. Ms. Pickrel has
resigned from the Company effective January 31, 2005. 28




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##### Table of Contents



John P. (Jack) Cashman became a Director upon the Merger in November, 1996. In addition, Mr.
Cashman served as Chairman of the Board, Chief Executive Officer and President upon the Merger
until Mr. Indelicato joined the Company in July 1998. From 1989 until March 1996, Mr.



 Cashman served as Chairman and Co-Chief Executive Officer of R. P. Scherer Corporation. David P. Spalding became a Director of the Company upon the Merger. Mr. Spalding has been Vice
Chairman of Cypress since its formation in April 1994. Prior to joining Cypress, Mr. Spalding was
Managing Director in the Merchant Banking Group of Lehman Brothers Inc. since February 1991. Mr.
Spalding is also a director of Lear Corporation, Republic National
Cabinet Corporation and Cooper-Standard Automotive Inc. James A. Stern became a Director of the Company upon the Merger. Mr. Stern has been Chairman of
Cypress since its formation in April 1994. Prior to joining Cypress, Mr. Stern spent his entire
career with Lehman Brothers Inc., most recently as head of the Merchant Banking Group. Mr. Stern
is a director of Lear Corporation, Wesco International Inc., Affinia
Group Inc. and Med Pointe Inc. Gerald Willinger became a Director of the Company in June 2004. Mr. Willinger has been a Principal
and Vice President of Cypress since April 2003. Prior to that, Mr. Willinger was a Vice President
at MidOcean Partners, the former private equity arm of Deutsche Bank, from 2000 to 2003. Mr.
Willinger is also a director of Cooper-Standard Automotive Inc. Audit Committee Financial Expert The Finance Committee (performs similar functions as an audit committee (the Committee), which
comprises a member of the Board of Directors (the Board), is designated to oversee the
financial reporting process of the Board. David Spalding, a member
of the Committee, serves as the audit committee financial expert as defined by SEC rules. Mr.
Spalding is not independent of the Company. Because the Company is not listed on an exchange, the
Company has chosen to use the definition of independence for audit committee members as such
term is used by the New York Stock Exchange listing standards. Code of Ethics The Company has adopted a Code of Ethics, within the meaning of applicable SEC rules, applicable to
its principal executive, financial and accounting officers, or persons performing similar
functions. The Company has filed its Code of Ethics as an exhibit to this annual report
on Form 10-K. Compliance with Section 16(a) of the Securities Exchange Act of 1934. 
 Not applicable 29




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##### Table of Contents



ITEM 11. EXECUTIVE COMPENSATION The following table summarizes the compensation paid or accrued by the Company to its Chief
Executive Officer and the four other most highly compensated executive officers who earned more
than $100,000 in salary and bonus in 2004 in each case for services rendered in all capacities to
the Company during the three year period ended December 31, 2004: Summary Compensation Table Long TermAnnual
    
    
    CompensationCompensation (a)
    
    
    AwardsSecuritiesName and Principal
    
    
    
    
    
    
    
    
    
    
    
    
    
    Underlying
    
    
    All OtherPosition
    
    Year
    
    
    Salary (b)
    
    
    Bonus
    
    
    Options/SARs
    
    
    Compensation (c)Albert D. Indelicato
    
    
    2004
    
    
    $
    400,000
    
    
    $
    
    
    
    
    
    
    
    $
    14,900Chairman, President and
    
    
    2003
    
    
    
    414,231
    
    
    
    
    
    
    
    
    

    
    
    71,403Chief Executive Officer
    
    
    2002
    
    
    
    350,000
    
    
    
    217,000
    
    
    
    
    
    
    
    76,617William Chohfi
    
    
    2004
    
    
    
    296,700
    
    
    
    
    
    
    
    
    
    
    
    43,490President  Alfa European
    
    
    2003
    
    
    
    264,653
    
    
    
    109,130
    
    
    
    
    
    
    
    35,101Operations
    
    
    2002
    
    
    
    212,556
    
    
    
    37,000
    
    
    
    
    
    
    
    22,020Larry T. Guillemette
    
    
    2004
    
    
    
    194,375
    
    
    
    

    
    
    
    
    
    
    
    11,484Executive
Vice President,
    
    
    2003
    
    
    
    201,945
    
    
    
    
    
    
    
    
    
    
    
    11,779Chief Financial Officer and
    
    
    2002
    
    
    
    190,457
    
    
    
    67,000
    
    
    
    
    
    
    
    30,783TreasurerJoseph L. DePaula
    
    
    2004
    
    
    
    182,654
    
    
    
    
    
    
    
    
    
    
    
    18,963Vice
President - Finance
    
    
    2003
    
    
    
    187,365
    
    
    
    
    
    
    
    
    
    
    
    19,237and Corporate Controller
    
    
    2002
    
    
    
    171,961
    
    
    
    35,000
    
    
    
    
    
    
    
    14,053Christopher A. Laus
    
    
    2004
    
    
    
    168,004
    
    
    
    
    
    
    
    
    
    
    
    9,131Senior Vice
President -
    
    
    2003
    
    
    
    172,466
    
    
    
    
    
    
    
    
    
    
    
    11,494Operations
    
    
    2002
    
    
    
    159,855
    
    
    
    70,000
    
    
    
    
    
    
    
    29,596
 30




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##### Table of Contents



(a)
    
    Any perquisites or other personal benefits received from the Company by any of the named
executives were substantially less than the reporting thresholds established by the Securities
and Exchange Commission (the lesser of $50,000 or 10% of the individuals cash compensation).(b)
    
    Includes portion of salary deferred under the Companys 401(k) Plan.(c)
    
    Amounts paid in 2004 include the Companys contributions under the Companys 401(k) Plan in
the amount of $10,380, $10,046, $7,822, and $9,476 for Mssrs. Indelicato, Guillemette, Laus,
and DePaula, respectively, premiums paid by the Company with respect to term life and
long-term disability insurance purchased for such executive officers in the amount of $1,707,
$1,438, $1,309, $408 and $1,387 for Mssrs. Indelicato, Guillemette, Laus, Chohfi, and DePaula,
respectively and an automobile allowance received by Messrs. Indelicato, Chohfi, and DePaula,
respectively, in the amount of $2,813, $14,193, and $8,100, respectively. Mr. Chohfi received
other compensation in the amount of $28,889 in connection with his employment agreement. Option Plans  The following table sets forth certain information regarding currently outstanding options to buy
the common stock of Holdings held by the directors or former directors and named executive officers as of December 31,
2004. Aggregated Option/SAR Exercises in Last Fiscal Year and Year-End Option/SAR Values Number ofSecuritiesUnderlyingUnexercisedNumber of
    
    
    
    
    
    
    Option/SARs atSecurities
    
    
    
    
    
    
    Calendar Year
    
    
    Value ofUnderlying
    
    
    
    
    
    
    End 2004
    
    
    UnexercisedOptions/SARs
    
    
    Value
    
    
    Exercisable/
    
    
    In-the-MoneyName
    
    Exercised
    
    
    Realized($)
    
    
    Unexercisable
    
    
    Options/SAR($)John P. Cashman
    
    
    0
    
    
    
    0
    
    
    
    23,281/0
    
    
    
    0/0Albert D. Indelicato
    
    
    0
    
    
    
    0
    
    
    
    15,250/0
    
    
    
    0/0Larry T. Guillemette
    
    
    0
    
    
    
    0
    
    
    
    5,500/0
    
    
    
    0/0Andrew M. Massimilla
    
    
    0
    
    
    
    0
    
    
    
    10,520/0
    
    
    
    0/0William
Chohfi
    
    
    0
    
    
    
    0
    
    
    
    2,500/0
    
    
    
    0/0
 31




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##### Table of Contents



Supplemental Retirement Plans 
 The Company maintains two Supplemental Retirement Plans: Supplemental Retirement Plan I
which covers a former officer and director and Supplemental Retirement Plan II which covers
two former officers. In the event a participant in either Supplemental Plan dies after
retirement, the participants beneficiary will receive any remaining benefits which such
participant was entitled to receive at the time of the participants death. Employment Agreements and Other Transactions 
 The Company has entered into an employment agreement (Employment Agreement) with Mr.
Indelicato to secure his continued employment with the Company. The Employment Agreement
provides for an annual base salary, subject to annual adjustments. In addition, Mr.
Indelicato is entitled to participate in incentive compensation plans and all employee
benefit arrangements generally appropriate to his responsibilities. In the event Mr.
Indelicatos employment is terminated without cause by the Company, he would be entitled
(for a period of 18 months after termination) to continuation of monthly salary, including
the pro rata portion of any bonus or other incentive compensation otherwise payable for the
fiscal period in which such termination occurs, and maintenance of all life, disability,
medical and health insurance benefits to which Mr. Indelicato was entitled immediately prior
to termination. The Company
entered into agreements with three key executives during the fourth
quarter of 2004 that would be triggered in the event of a
Change of Control of the Company. In addition, the
Company entered into Change of Control Agreements with four
executives during the fourth quarter of 2004 that would be triggered
in the event of a Change of Control of the Company and
certain other facts set forth therein. These agreements have been
filed as exhibits within this Form 10-K under material contracts. In addition,
AMTROL Holdings Inc. and Amtrol Inc. entered into Indemnification and
Advancement of Expenses Agreements (the Indemnification
Agreements) with its respective Board of Directors during the
fourth quarter of 2004. The Indemnification Agreements stipulate that
AMTROL Holdings Inc. and Amtrol Inc. will indemnify their respective
Board of Directors to the fullest extent permitted by the General
Corporation Law of the State of Delaware (AMTROL Holdings Inc.) and
the Rhode Island Business Corporation Act (Amtrol Inc.) should they
be or are threatened to be made a party, witness or other participant
in any threatened, pending or completed action, suit, proceeding or
alternative dispute resolution related to their position as director,
officer, employee or agent of the above companies. The
Indemnification Agreements related to the individual companies listed
above were signed by all members of the respective Board of Directors
and a form of the Indemnification Agreements is attached as exhibits
to this Annual Report. Effective
December 30, 2004 Director Andrew M. Massimilla resigned his
director position with AMTROL Holdings Inc. and Amtrol Inc.
Mr. Massimilla also resigned his post on the Companys
Executive Committee. Mr. Massimilla did not resign as a result
of a disagreement with the Company. Directors Compensation 
 The Company has a total of five directors, four of who are non-employees, that sit on
various committees. For 2004, one non-employee director,
Mr. Cashman,
was paid $2,500 per meeting attended plus out-of-pocket expenses associated with
travel. Mr. Massimilla, prior to his resignation, was also paid
$2,500 per meeting attended plus out-of-pocket expenses associated
with travel. The three remaining non-employee directors,
Mr. Spalding, Mr. Stern and Mr. Willinger, did not
receive any remuneration for any of the meetings attended, except for
out-of-pocket travel expenses, given their association to Cypress. Compensation and Benefits Committee 
 The Compensation and Benefits Committee held one meeting in 2004. Messrs. Spalding and
Stern are the current members of this committee. This committee has functions that include
reviewing the salary system with regard to external competitiveness and reviewing incentive
compensation plans to ensure that they continue to be effective incentive and reward
systems. The Compensation and Benefits Committee also determines the CEOs compensation and
considers and, if appropriate, approves the CEOs recommendations with respect to the
compensation of executive officers who report to him. Compensation Committee Interlocks and Insider Participation No member of the Committee has any interlocking or insider relationship with the Company
which is required to be reported under the applicable rules and regulations of the
Securities and Exchange Commission. 32




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##### Table of Contents



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The Company is a direct, wholly-owned subsidiary of Holdings Inc. The following table sets
forth information with respect to the beneficial ownership of Holdings common stock or
preferred stock as of March 28, 2005 by (i) each person known to the Company to beneficially
own more than 5% of Holdings Inc.s outstanding common stock, (ii) each of the Companys
directors and named executive officers and (iii) all directors and executive officers of the
Company as a group. Each share of Holdings Inc. preferred stock is convertible at any time
into one share of Holdings Inc. common stock. Unless otherwise indicated below, the persons
and entities named in the table have sole voting and investment power with respect to all
 shares beneficially owned. Common Stock
    
    Preferred StockNumberof
    
    Percentage
    
    Number
    
    PercentageName and Address of Beneficial Owner
    
    Shares
    
    of Total
    
    of Shares
    
    of TotalCypress Merchant Banking Partners L.P.(a) (c)

c/o The Cypress Group L.L.C.
65 East
55th
Street,
28th
Floor
New York, NY 10022
    
    847,127
    
    86.9
    
    95,076
    
    93.0Cypress
Offshore Partners L.P. (a) (c)
c/o The Cypress Group L.L.C.
65 East
55th
Street,
28th
Floor
New York, NY 10022
    
    43,873
    
    4.5
    
    4,924
    
    4.8John P. Cashman (b)
    
    40,517
    
    4.2
    
    2,235
    
    2.2Larry T. Guillemette (b)
    
    6,166
    
    0.6
    
    
    
    Albert D. Indelicato (b)
    
    17,416
    
    1.8
    
    
    
    Andrew M.
Massimilla (b)(d)
    
    11,186
    
    1.1
    
    
    
    Christopher A. Laus
    
    3,200
    
    0.3
    
    
    
    William Chohfi
    
    5,616
    
    0.6Joseph L. DePaula
    
    
    
    
    
    
    
    David P. Spalding(a)
    
    
    
    
    
    
    
    James A. Stern(a)
    
    
    
    
    
    
    
    Gerald Willinger(a)
    
    
    
    
    
    
    
    All directors and executive officers as a group
(consisting of 10 persons)
    
    84,101
    
    8.6
    
    2,235
    
    2.2
   (a)
    Cypress Merchant Banking Partners L.P. and Cypress Offshore Partners L.P.
are affiliates of The Cypress Group L.L.C. Messrs. Spalding and Stern are
executives of The Cypress Group L.L.C. and may be deemed to share beneficial
ownership of the shares shown as beneficially owned by such Cypress entities.
Each of such individuals disclaims beneficial ownership of such shares. See
Item 10, Directors and Executive Officers of the Company.  (b)
    Includes 44,796, 11,000, 30,500, and 21,039, shares of Common
Stock issuable upon exercise of options granted to Messrs. Cashman,
Guillemette, Indelicato, and Massimilla, respectively. See Item 11,
Executive Compensation.  (c)
    Includes 57,046 and 2,954 shares of common stock issuable upon
exercise of warrants granted to Cypress Merchant Banking Partners, L.P. and
Cypress Offshore Partners, L.P.  (d)
    Mr. Massimilla resigned effective December 30, 2004. 33




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##### Table of Contents



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS A director of the Company, Mr. Massimilla, provides management consulting services to the
Company for which he is paid by the Cypress Group L.L.C. The Company reimburses Cypress for
its payments to Mr. Massimilla. During 2004, the amount of such payments was $39,622. 
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Audit Fees: The Company
during the years 2003 and 2004 were billed audit fees of $408,500 and
$429,000, respectively. Audit Related Fees: The Company during the years 2003 and 2004 were billed audit related fees of $15,000 and
$16,500, respectively. Tax Fees: The Company
during the years 2003 and 2004 were billed tax fees of $43,415 and
$37,150,
respectively. All Other Fees: The Company
during the years 2003 and 2004 was billed fees for market diligence
services of $0 and $87,500, respectively. 34




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##### Table of Contents



ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) (1) Financial Statements The following financial statements are included in a separate section of this Report
commencing on the page numbers specified below: PageReport of Independent Registered Public Accounting Firm
    
    36Consolidated Balance Sheets as of December 31, 2003 and 2004

    
    37Consolidated Statements of Operations and Comprehensive Income (Loss)
for the years ended December 31, 2002, 2003 and 2004
    
    38Consolidated Statements of Shareholders Equity for the years
ended December 31, 2002, 2003 and 2004
    
    39Consolidated Statements of Cash Flows for the years ended
December 31, 2002, 2003 and 2004
    
    40Notes to Consolidated Financial Statements
    
    42(a) (2) Financial Statement ScheduleSchedule II - Valuation and Qualifying Accounts and Reserves for the
years ended December 31, 2002, 2003 and 2004.

    
    57
 All other schedules for which provision is made in the applicable accounting regulations of the
Securities and Exchange Commission are not required under the related instructions or are
inapplicable, and therefore have been omitted. (a) (3) Exhibits See List of
Exhibits, Page 60. 35




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##### Table of Contents



Report of Independent Registered Public Accounting Firm To the Board of Directors of
AMTROL Inc. We have audited the accompanying consolidated balance sheets of AMTROL Inc. (the Company) as of
December 31, 2004 and 2003, and the related consolidated statements of operations, comprehensive
income (loss), shareholders equity (deficit), and cash flows for each of the three years in the period ended
December 31, 2004. Our audits also included the financial statement schedule listed in the Index at
Item 15(a). These financial statements and schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial statements and schedule
based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. We
were not engaged to perform an audit of the Companys internal control over financial reporting.
Our audit included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion. In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of AMTROL Inc. at December 31, 2004 and 2003, and the
consolidated results of its operations and its cash flows for each of the three years in the period
ended December 31, 2004, in conformity with U.S. generally accepted accounting principles. Also, in
our opinion, the related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects the information set
forth therein. As discussed in Note 2 to the consolidated financial statements, effective January 1, 2002, the
Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible
Assets. ERNST & YOUNG LLPMarch 22, 2005
Providence, Rhode Island
 36




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##### Table of Contents



AMTROL INC. AND SUBSIDIARIES 
 Consolidated Balance Sheets  (In thousands)
 December 312003
    
    
    2004AssetsCurrent Assets:Cash and cash equivalents
    
    $
    13,289
    
    
    $
    12,378Accounts receivable, less allowance for doubtful accounts of
$1,196 and $1,049 in 2003 and 2004, respectively
    
    
    27,211
    
    
    
    29,946Inventories
    
    
    24,345
    
    
    
    30,637Tax refund receivable
    
    
    1,838
    
    
    
    2,010Deferred income taxes - short-term
    
    
    1,489
    
    
    
    Prepaid expenses and other
    
    
    1,127
    
    
    
    1,030Assets of discontinued operations
    
    
    6,939
    
    
    
    Total current assets
    
    
    76,238
    
    
    
    76,001Property, Plant and Equipment, at costLand
    
    
    4,035
    
    
    
    4,162Buildings and improvements
    
    
    11,868
    
    
    
    12,681Machinery and equipment
    
    
    60,703
    
    
    
    67,608Furniture and fixtures
    
    
    1,434
    
    
    
    1,491Information systems software and other
    
    
    7,242
    
    
    
    9,05185,282
    
    
    
    94,993Less: accumulated depreciation and amortization
    
    
    54,771
    
    
    
    64,19330,511
    
    
    
    30,800Other Assets:Goodwill
    
    
    119,205
    
    
    
    119,205Deferred financing costs
    
    
    2,880
    
    
    
    1,920Deferred income taxes - long-term
    
    
    7,459
    
    
    
    Other
    
    
    730
    
    
    
    314130,274
    
    
    
    121,439$
    237,023
    
    
    $
    228,240Liabilities and Shareholders Equity (Deficit)Current Liabilities:Current maturities of long-term debt
    
    $
    2,957
    
    
    $
    2,957Notes payable to banks
    
    
    9,283
    
    
    
    10,774Accounts payable
    
    
    22,570
    
    
    
    23,006Accrued volume rebates
    
    
    3,927
    
    
    
    4,615Accrued expenses
    
    
    7,592
    
    
    
    10,158Accrued interest
    
    
    241
    
    
    
    256Accrued income taxes
    
    
    856
    
    
    
    1,415Liabilities of discontinued operations
    
    
    1,928
    
    
    
    Total current liabilities
    
    
    49,354
    
    
    
    53,181Other Noncurrent Liabilities
    
    
    3,436
    
    
    
    3,979Long-Term Debt, less current maturities
    
    
    167,022
    
    
    
    171,300Commitments and Contingencies
    
    
    
    
    
    
    Shareholders Equity (Deficit)Capital stock $.01 par value - authorized 1,000 shares,
100 shares issued
    
    
    
    
    
    
    Additional paid-in capital
    
    
    99,273
    
    
    
    99,273Accumulated deficit
    
    
    (83,125
    )
    
    
    (105,339
    )Accumulated other comprehensive income
    
    
    1,063
    
    
    
    5,846Total shareholders equity (deficit)
    
    
    17,211
    
    
    
    (220
    )$
    237,023
    
    
    $
    228,240
 The accompanying notes are an integral part of these consolidated financial statements. 37




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##### Table of Contents



AMTROL INC. AND SUBSIDIARIES 
 Consolidated Statements of Operations  (In thousands)
 Year Ended December 312002
    
    
    2003
    
    
    2004Net sales
    
    $
    179,416
    
    
    $
    185,046
    
    
    $
    198,394Cost of goods sold
    
    
    136,556
    
    
    
    144,761
    
    
    
    152,136Gross profit
    
    
    42,860
    
    
    
    40,285
    
    
    
    46,258Operating expenses:Selling
    
    
    11,038
    
    
    
    11,075
    
    
    
    11,267General and administrative
    
    
    16,252
    
    
    
    15,627
    
    
    
    17,038Income from operations
    
    
    15,570
    
    
    
    13,583
    
    
    
    17,953Other income (expense):Interest expense
    
    
    (19,918
    )
    
    
    (19,564
    )
    
    
    (21,664
    )Interest income
    
    
    51
    
    
    
    65
    
    
    
    152Gain on extinguishment of debt, net
    
    
    
    
    
    
    6,760
    
    
    
    Other income (expense), net
    
    
    (385
    )
    
    
    (100
    )
    
    
    (55
    )Income (loss) before provision for income taxes
and cumulative effect of a change in accounting principle
    
    
    (4,682
    )
    
    
    744
    
    
    
    (3,614
    )Provision for income taxes
    
    
    774
    
    
    
    1,166
    
    
    
    9,737Loss from continuing operations
    
    
    (5,456
    )
    
    
    (422
    )
    
    
    (13,351
    )Discontinued operations:Loss from sale of subsidiary, net
    
    
    
    
    
    
    
    
    
    
    (8,093
    )Loss from discontinued operations, net
    
    
    (5,381
    )
    
    
    (1,310
    )
    
    
    (770
    )Loss before cumulative effect of a change in accounting principle
    
    
    (10,837
    )
    
    
    (1,732
    )
    
    
    (22,214
    )Cumulative effect of a change in accounting principle
    
    
    (34,492
    )
    
    
    
    
    
    
    Net loss
    
    $
    (45,329
    )
    
    $
    (1,732
    )
    
    $
    (22,214
    )
 Consolidated Statements of Comprehensive Income (Loss)(In thousands) Year Ended December 312002
    
    
    2003
    
    
    2004Net loss
    
    $
    (45,329
    )
    
    $
    (1,732
    )
    
    $
    (22,214
    )Foreign currency translation adjustments
    
    
    2,799
    
    
    
    2,800
    
    
    
    4,726Derivative instrument valuation
    
    
    160
    
    
    
    294
    
    
    
    57Comprehensive income (loss)
    
    $
    (42,370
    )
    
    $
    1,362
    
    
    $
    (17,431
    )
 The accompanying notes are an integral part of these consolidated financial statements . 38




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AMTROL INC. AND SUBSIDIARIES 
 Consolidated Statements of Shareholders Equity(In thousands) AccumulatedAdditional
    
    
    
    
    
    
    OtherCapital
    
    
    Paid-in
    
    
    Retained
    
    
    ComprehensiveStock
    
    
    Capital
    
    
    (Deficit)
    
    
    Income (Loss)Balance, December 31, 2001
    
    $
    
    
    
    $
    99,273
    
    
    $
    (36,064
    )
    
    $
    (4,990
    )Net loss
    
    
    
    
    
    
    
    
    
    
    (45,329
    )
    
    
    Derivative instrument valuation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    160Currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,799Balance, December 31, 2002
    
    
    
    
    
    
    99,273
    
    
    
    (81,393
    )
    
    
    (2,031
    )Net loss
    
    
    
    
    
    
    
    
    
    
    (1,732
    )
    
    
    Derivative instrument valuation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    294Currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,800Balance, December 31, 2003
    
    
    
    
    
    
    99,273
    
    
    
    (83,125
    )
    
    
    1,063Net loss
    
    
    
    
    
    
    
    
    
    
    (22,214
    )
    
    
    Derivative instrument valuation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57Currency
translation adjustment from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,483
    )Currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,209Balance, December 31, 2004
    
    $
    
    
    
    $
    99,273
    
    
    $
    (105,339
    )
    
    $
    5,846
 The accompanying notes are an integral part of these consolidated financial statements . 39




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AMTROL INC. AND SUBSIDIARIES 
 Consolidated Statements of Cash Flows
 (In thousands)
 Year Ended December 312002
    
    
    2003
    
    
    2004Cash Flows Provided by (Used in) Operating Activities:Loss from continuing operations
    
    $
    (39,948
    )
    
    $
    (422
    )
    
    $
    (13,351
    )Loss from discontinued operations
    
    
    (5,381
    )
    
    
    (1,310
    )
    
    
    (8,863
    )Cumulative effect of a change in accounting principle
    
    
    34,492
    
    
    
    
    
    
    
    Adjustments to reconcile net loss to net cash
provided by (used in) operating activities -Depreciation
    
    
    7,756
    
    
    
    8,292
    
    
    
    7,480Amortization
    
    
    1,047
    
    
    
    1,452
    
    
    
    1,328Deferred income tax provision
    
    
    
    
    
    
    
    
    
    
    8,812Provision for losses on accounts receivable
    
    
    143
    
    
    
    77
    
    
    
    73Gain on extinguishment of debt, net
    
    
    
    
    
    
    (6,760
    )
    
    
    Deferred
interest
    
    
    3,847
    
    
    
    4,517
    
    
    
    6,667Loss on sale of fixed assets
    
    
    5
    
    
    
    
    
    
    
    Impairment
of long-lived assets  discontinued operations
    
    
    3,595
    
    
    
    
    
    
    
    Changes in operating assets and liabilities:Accounts receivable, net
    
    
    4,287
    
    
    
    1,853
    
    
    
    (1,584
    )Tax refund receivable
    
    
    (309
    )
    
    
    746
    
    
    
    (12
    )Inventory
    
    
    (1,123
    )
    
    
    (769
    )
    
    
    (5,386
    )Prepaid expenses and other current assets
    
    
    (601
    )
    
    
    365
    
    
    
    252Other assets
    
    
    1,184
    
    
    
    2,414
    
    
    
    486Accounts payable
    
    
    2,598
    
    
    
    (5,120
    )
    
    
    (685
    )Accrued expenses and other current liabilities
    
    
    (2,323
    )
    
    
    (1,782
    )
    
    
    4,529Other noncurrent liabilities
    
    
    31
    
    
    
    658
    
    
    
    475Net assets of discontinued operations
    
    
    (2,112
    )
    
    
    (1,134
    )
    
    
    7,148Net cash provided by operating activities
    
    
    7,188
    
    
    
    3,077
    
    
    
    7,369Cash Flows Used in Investing Activities:Proceeds from sale of property, plant and equipment
    
    
    7
    
    
    
    
    
    
    
    Proceeds
from sale of discontinued business
    
    
    
    
    
    
    
    
    
    
    363Capital expenditures
    
    
    (3,165
    )
    
    
    (3,249
    )
    
    
    (6,626
    )Net cash used in investing activities
    
    
    (3,158
    )
    
    
    (3,249
    )
    
    
    (6,263
    )Cash Flows Provided by (Used in) Financing Activities:Repayment of long term debt
    
    
    (125,867
    )
    
    
    (124,276
    )
    
    
    (138,879
    )Issuance of long term debt
    
    
    122,982
    
    
    
    119,933
    
    
    
    135,803Repayment of short term debt
    
    
    (25,649
    )
    
    
    (15,461
    )
    
    
    (21,026
    )Issuance of short term debt
    
    
    25,120
    
    
    
    16,350
    
    
    
    21,663Issuance of new senior debt and warrants
    
    
    
    
    
    
    15,000
    
    
    
    Net cash
provided by (used in) financing activities
    
    
    (3,414
    )
    
    
    11,546
    
    
    
    (2,439
    )Net increase
(decrease) in cash and cash equivalents
    
    
    616
    
    
    
    11,374
    
    
    
    (1,333
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    135
    
    
    
    216
    
    
    
    422Cash and cash equivalents, beginning of period
    
    
    948
    
    
    
    1,699
    
    
    
    13,289Cash and cash equivalents, end of period
    
    $
    1,699
    
    
    $
    13,289
    
    
    $
    12,378
 The accompanying notes are an integral part of these consolidated financial statements. 40




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41




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (1)
    Basis of PresentationAMTROL Inc., a Rhode Island corporation, and its wholly-owned subsidiaries (collectively
referred to herein as the Company), design, manufacture and market products used
principally in flow control, storage, heating and other treatment of fluids in the water
systems market and selected sectors of the heating, ventilating and air conditioning (HVAC)
market. The Company offers a broad product line of quality fluid handling products and
services marketed under widely recognized brand names.The Company is a wholly-owned subsidiary of AMTROL Holdings, Inc. (Holdings Inc.), a
Delaware corporation formed by The Cypress Group, LLC (Cypress) in 1996 to effect the
acquisition of all of the outstanding common stock of the Company. Holdings Inc. has no other
material assets, liabilities or operations other than those that result from its ownership of
the common stock of the Company.(2)
    Summary of Significant Accounting PoliciesPrinciples of ConsolidationThe accompanying consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries. All material intercompany balances and transactions have been
eliminated in consolidation.Use of EstimatesThe preparation of consolidated financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.Fiscal YearThe Company uses a calendar fiscal year and three quarterly interim periods ending on Saturday
of the thirteenth week of the quarter.ReclassificationsCertain prior year balances have been reclassified to conform to the current year
presentation.Revenue Recognition and Related CostsIn accordance with Staff Accounting Bulletin (SAB) No. 104, the Company recognizes revenue
only when there is a valid contract or purchase order, which includes a fixed price; the goods
have been delivered in accordance with the shipping terms; and there is an expectation that
the collection of the revenue is reasonably assured.
Shipping/handling fees and costs are included in net sales and cost of goods sold, respectively, consistent
with the presentation required by Emerging Issues Task Force (EITF) 00-10. 42




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(2) Summary
of Significant Accounting Policies (Continued)
The Company generally recognizes revenue upon shipment of its products to customers net
of applicable provisions for discounts and allowances. Allowances for cash discounts and
volume rebates, among others, are recorded as a reduction to revenue at the time of sale based
upon the estimated future outcome. Cash discounts and volume rebates are based upon certain
percentages and sales targets agreed to with the Companys customers, which are typically
earned by the customers over an annual period. The allowance for volume rebates is consistent
with the provisions of EITF 00-22, Accounting for Points and Certain Other Time-Based or
Volume-Based Sales Incentive Offers, and Offers for Free Products or Services to Be Delivered
in the Future. Cash and Cash Equivalents Cash and cash equivalents include cash on hand and short-term investments that are readily
convertible into cash with an original maturity to the Company of three months or less. Allowance for Doubtful Accounts In circumstances where the Company is aware of a specific customers inability to meet its
financial obligations, an allowance is established. The majority of accounts are individually
evaluated on a regular basis and appropriate allowances are established as deemed appropriate.
The remainder of the allowance is based upon historical trends and current market
assessments. Concentration of Credit Risk The Company extends credit to almost all its customers on an uncollateralized basis.
Concentration of credit and geographic risk with respect to accounts receivable is limited due
to the large number of and general dispersion of accounts which constitute the Companys
customer base. The Company periodically performs credit evaluations of its customers. At
December 31, 2003 and 2004, there were no customers accounting for greater than ten percent of
the Companys accounts receivable. The Company has not experienced significant credit losses
on customers accounts. The Company invests its excess cash in highly liquid short-term investments. The Company has
established guidelines that maintain safety and liquidity and reviews these guidelines when
economic conditions change. The Company has not experienced any losses on its cash
equivalents or short-term investments. Depreciable Property and Equipment Property, plant, and equipment are stated on the basis of cost. The Company provides for
depreciation by charges to income (computed on the straight-line method) in amounts estimated
to depreciate the cost of properties over their estimated useful lives which generally fall
within the following ranges: Building and improvements
    
    10-40 yearsMachinery and equipment
    
    3-12 yearsFurniture and fixtures
    
    5-20 yearsOther
    
    3-10 years
 43




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(2) Summary of Significant Accounting Policies (Continued) Leasehold improvements are amortized over the life of the lease or the estimated useful life
of the improvement, whichever is shorter. Interest costs, during the construction period, on borrowings used to finance construction of
buildings and related property are included in the cost of the constructed property. As of
December 31, 2004, the Company had no capitalized interest. Inventories The Companys inventories are stated at the lower of cost or market including material, labor
and manufacturing overhead (see Note 3). The Company records provisions, as appropriate, to
write-down obsolete and excess inventory to estimated net realizable value. The process for
evaluating obsolete and excess inventory often requires the Company to make subjective
judgments and estimates concerning future sales levels, quantities and prices at which such
inventory will be able to be sold in the normal course of business. Accelerating the disposal
process or incorrect estimates of future sales potential may cause the actual results to
differ from the estimates at the time such inventory is disposed or sold. The Company
believes that its procedures for estimating such amounts are reasonable and historically have
not resulted in material adjustments in subsequent periods when the estimates are adjusted to
the actual amounts. Warranty The Company extends various warranties covering most of its products ranging from a limited
one-year warranty to a limited lifetime warranty against defects in materials and workmanship.
The specific terms and conditions of the warranties depend on the type of product that is
sold. The Companys warranties are generally limited to the replacement of the defective
parts or products at the Companys option. The Company estimates the costs that may be
incurred under its warranty program and records a liability at the time of sale. Factors that
influence the Companys warranty liability include the amount of production, manufactured cost
of the product, historical warranty returns and anticipated returns based upon engineering and
material improvements. The Company periodically assesses the adequacy of its warranty reserve
through a detailed analysis and adjusts the reserve accordingly. As part of the Companys regular review of its warranty reserve during 2003 and 2004, the
Company increased its warranty reserve by $0.8 million and $0.7 million, respectively. This
was due to higher steel costs in 2004 and a higher than anticipated level of warranty returns associated with its limited
lifetime products during both periods. The following
chart illustrates the changes in the Companys warranty reserve
during 2003 and 2004: 44




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##### Table of Contents



(2) Summary of Significant Accounting Policies (Continued) (in thousands) 2003
    
    
    2004Balance, beginning of year
    
    $
    2,269
    
    
    $
    3,065Warranties issued during year
    
    
    2,055
    
    
    
    1,924Claims during year
    
    
    (2,055
    )
    
    
    (1,987
    )Change in estimate
    
    
    796
    
    
    
    660Balance, end of year
    
    $
    3,065
    
    
    $
    3,662
 Goodwill and Long-Lived Assets Goodwill represents the excess of acquisition costs over the estimated fair value of the net
assets acquired. The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets,which
requires that amortization of goodwill cease and that the Company evaluate the recoverability
of goodwill and other intangible assets annually, or more frequently if events or changes in
circumstances, such as a decline in sales, earnings or cash flows, or material adverse changes
in the business climate, indicate that the carrying value of an asset might be impaired.
Goodwill is considered to be impaired when the net book value of a reporting unit exceeds its
estimated fair value. Fair values are established using a discounted cash flow methodology (specifically, the income
approach). The determination of discounted cash flows is based on the Companys strategic
plans and long-range forecasts. The revenue growth rates included in the forecasts are the
Companys best estimates based on current and anticipated market conditions, and the profit
margin assumptions are projected based on the current and anticipated costs structures. In
accordance with the SFAS No. 142 transition procedures, the Company recorded a goodwill
impairment charge for the cumulative effect of a change in accounting principle of $38.1
million upon adoption of SFAS No. 142, as further described in Note 4. In accordance
with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (SFAS No. 144), the Company has
evaluated the realizability of non-goodwill long-lived assets, which
primarily consist of property, plant and equipment and intangible
assets, based on expectations of the non-discounted future cash flows
for each subsidiary having a material amount of these assets. If the
sum of the expected non-discounted future cash flows is less than the
carrying amount of all assets, the Company would recognize an impairment
loss. The Companys cash flow estimates
are based upon historical cash flows, as well as future projected cash flows received from
subsidiary management in connection with the annual Company wide planning process, and include
a terminal valuation for the applicable subsidiary based upon a multiple of earnings before
interest expense, taxes and depreciation and amortization expense (EBITDA). The
Company estimates the EBITDA multiple by reviewing comparable company information and other
industry data. The Company believes that its procedures for estimating gross future cash
flows, including the terminal valuation, are reasonable and consistent with current market
conditions. Based on its most recent analysis, the Company believes
no material impairment exists at December 31, 2004. 45




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(2)Summary of Significant Accounting Policies (Continued) Fair Value of Financial Instruments In accordance with the requirements of SFAS No. 107, Disclosures About Fair Value of Financial
Instruments, the Company has determined the estimated fair value of its financial instruments
using appropriate market information and valuation methodologies. Considerable judgment is
required to develop the estimates of fair value; thus, the estimates are not necessarily
indicative of the amounts that could be realized in a current market exchange. The Companys
financial instruments consist of cash, accounts receivable, accounts payable, senior
subordinated notes and bank debt. Based upon information provided by an independent financial
advisor, the Company believes that the fair value of the senior subordinated notes is
approximately $85 to $88 on a par value of $100. The carrying value of the remaining assets
and liabilities is a reasonable estimate of the fair value at December 31, 2004. Research and Development Expenses All costs for research and development, which amounted to approximately $0.8 million, $0.9
million, and $0.8 million for the years ended December 31, 2002, 2003, and 2004, respectively,
are charged to general and administrative expenses as incurred. Deferred Financing Costs Deferred financing costs are stated at cost and amortized over the life of the related debt
using the effective interest method. Amortization of deferred financing costs is included in
interest expense. Foreign Currency Translation Assets and liabilities of non-U.S. operations have been translated into United States dollars
using the year-end rate of exchange. Shareholders equity has been converted using historical
rates, and revenues and expenses at the average exchange rates prevailing during the year.
The cumulative effect of the resulting translation is reflected as a separate component of
shareholders equity. $1.3 million, $0.6 million and $0.1 million in foreign currency
exchange losses were recorded in the Consolidated Statements of Operations during 2002, 2003
and 2004, respectively. During 2004, the Company used forward contracts, generally three months in duration, to hedge
its foreign currency exposures. The foreign currency exposures relate primarily to its
operations in Portugal. A portion of revenues from the Companys Portuguese operations were
denominated in U.S. dollars and British Pounds so as the Euro strengthened, the corresponding
receivables lost value. At December 31, 2004, the Companys Portuguese operations had forward
contracts for the purchase of $250,000 and £250,000 with maturity dates through February 2005.
The value of these forward contracts is immaterial to the balance sheet of the Company. The following table illustrates the components of accumulated other comprehensive income: 46




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(2)Summary of Significant Accounting Policies (Continued) (in thousands) 2003
    
    
    2004Currency translation adjustment
    
    $
    1,120
    
    
    $
    5,846Derivative instrument valuation
    
    
    (57
    )
    
    
    Total accumulated other comprehensive income
    
    $
    1,063
    
    
    $
    5,846
 Stock Options The Company accounts for employee stock options in accordance with SFAS No. 123, Accounting
for Stock Based Compensation. As permitted under SFAS No. 123, the Company applies Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees,and related
interpretations to account for its stock option plans. Accounting for Derivative Instruments and Hedging Activities The Company had an interest rate swap contract and an interest rate cap (the Contract) that
matured on June 30, 2004. The Company received the 90-day LIBOR rate and paid a fixed rate of
4.60%, unless LIBOR increased to 7.1%, for the period from January 1, 2001 through June 30,
2004. The Contract was designated as a cash flow hedge of variable future cash flows
associated with the Foothill Agreement Term A Loan and Term B Loan debt. Recent Accounting Pronouncements In December 2004, the FASB issued SFAS No. 123(R) (revised
2004), Share-Based Payment, which is a revision of SFAS No. 123.SFAS No. 123(R) supersedes
APB Opinion No. 25 and amends SFAS No. 95, Statement of Cash Flows.SFAS No. 123(R)
requires all share-based payments to employees, including grants of employee stock options, to
be recognized in the statement of operations based on their fair values. The new standard will be
effective for the Company in the quarter beginning July 1, 2005. The adoption of this
standard is not expected to have a material impact on the Companys overall financial position
and results of operations. In November 2004, the FASB issued SFAS No. 151, Inventory Costs  an amendment of ARB No.
43.SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning
after June 15, 2005. This Statement amends the guidance in ARB No. 43, Chapter 4, Inventory
Pricing,to clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material (spoilage). This Statement requires that those items be
recognized as current-period charges regardless of whether they meet the criterion of so
abnormal. In addition, this Statement requires that allocation of fixed production overheads
to the costs of conversion be based on the normal capacity of the production facilities. The
adoption of this standard is not expected to have a material impact on the Companys overall
financial position and results of operations. 47




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In January 2003, the FASB issued FASB Interpretation 46, Consolidation of Variable Interest
Entities, an Interpretation of ARB No. 51(Interpretation 46). In December 2003, the FASB
issued a revision to Interpretation 46 to make certain technical corrections and address
certain implementation issues that had arisen. Interpretation 46, as revised, provides a new
framework for identifying variable interest entities (VIEs) and determining when a company
should include the assets, liabilities, non-controlling interests and results of activities of
a VIE in its consolidated financial statements. Interpretation 46 was effective immediately
for VIEs created after January 31, 2003. The provisions of Interpretation 46, as revised, will
be adopted by the Company in 2005. The adoption of this Interpretation is not expected to
have a material impact on the Companys overall financial position, results of operations or
cash flows.  (3)
    InventoriesInventories are stated at the lower of cost (first-in, first-out method) or market and consist
of the following at December 31 (in thousands): 2003
    
    
    2004Raw materials and work in process
    
    $
    13,709
    
    
    $
    18,935Finished goods
    
    
    10,636
    
    
    
    11,702$
    24,345
    
    
    $
    30,637
  (4)
    Cumulative Effect of Change in Accounting PrincipleSFAS No. 142 requires that amortization of goodwill cease and that the Company evaluate the
recoverability of goodwill and other intangible assets annually, or more frequently if events
or changes in circumstances indicate that the carrying value of an asset might be impaired.Under SFAS No. 142, the Company was required to test all existing goodwill for impairment
(using a two-step method) as of January 1, 2002, on a reporting unit basis. The Company
determined its annual review date to be December 31 and the reporting units to be AMTROL North
America, AMTROL ALFA, AMTROL NOVA and AMTROL Poland. In step 1, goodwill is considered to be
impaired when the net book value of a reporting units exceeds its estimated fair value. The
fair values of the reporting units were determined utilizing a discounted cash flow
methodology and considered such assumptions as weighted average cost of capital, revenue
growth, profitability, capital expenditures and premium for control. For reporting units that
failed step 1, the Company proceeded to step 2. In step 2, the Company calculated the implied
fair value of goodwill by deducting the fair value of all tangible and intangible net assets
of the reporting unit from the fair value of the reporting unit as determined in step 1. The
Company then compared the implied fair value of goodwill as determined in step 2 above to the
carrying value of goodwill.As a result of the impairment review, the Company recorded an after-tax goodwill impairment
charge of $34.5 million at our North America Unit, which was recorded as a cumulative effect of change in accounting
principle as of January 1, 2002. 48




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The following represents a breakdown of goodwill by reportable business segment: NorthAmerica
    
    
    Europe
    
    
    ConsolidatedBalance, December 31, 2003 and 2004
    
    $
    95,305
    
    
    $
    23,900
    
    
    $
    119,205
 (5) Long-term Debt and Notes Payable to Banks Long-term debt consisted of the following at December 31, (in thousands): 2003
    
    
    2004Revolving credit facility
    
    $
    4,720
    
    
    $
    5,201Term A loan
    
    
    7,255
    
    
    
    5,548Term B loan
    
    
    20,338
    
    
    
    19,799Term C loan
    
    
    39,817
    
    
    
    45,860Senior subordinated notes, due 2006, 10.625%
    
    
    97,849
    
    
    
    97,849169,979
    
    
    
    174,257Less: Current maturities of long-term debt
    
    
    2,957
    
    
    
    2,957$
    167,022
    
    
    $
    171,300
 Revolving Credit and Term Loans The Company is a party to two credit facilities: a $52.5 million ($42.5 million prior to the
November 18, 2003 amendments discussed below) senior first-priority secured credit facility
arranged by Foothill Capital Corporation (as amended, the Foothill Facility) and a $35.0 million ($25.0
million prior to the November 18, 2003 amendments discussed below) senior second-priority
secured credit facility with affiliates of Cypress (as amended, the Cypress Facility). The Foothill Facility provides the Company (i) a term loan facility consisting of a five-year
Term A Loan maturing December 2006, with an outstanding principal amount of $5.5 million at
December 31, 2004, bearing cash interest at Wells Fargo Reference Rate (approximating the
prime rate) plus 0.75% (6.00% at December 31, 2004), and a four-year Term B Loan maturing
December 2006, with an outstanding principal amount of $19.8 million as of December 31, 2004,
bearing cash interest at the Wells Fargo Reference Rate plus 3.5%, and Paid-In-Kind (PIK)
interest at 3.5% (12.25% at December 31, 2004) (collectively the Term Loans) and (ii) a
five-year Revolving Credit Facility maturing December 2006, bearing interest at Wells Fargo
Reference Rate plus 0.5% (5.75% at December 31, 2004), providing the lesser of (a) $30.0
million less the aggregate outstanding principal amount of the Term A Loan less letter of
credit usage and (b) borrowing base less letter of credit usage. At December 31, 2004, total
availability and aggregate borrowings under the Revolving Credit Facility were $11.5 million
and $5.2 million, respectively. 49




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On November 18, 2003, the Company amended its Foothill Facility by entering into the First
Amendment and Waiver to Loan and Security Agreement (the First Amendment) and also amended
its Cypress Facility by entering into the Second Amendment to Loan and Security Agreement (the
Second Amendment). The First Amendment increased the Term B Loan by $15.0 million to $20.3
million and extended the maturity date of the Term B Loan to December 26, 2005. Commitments
under the Revolving Credit Facility and Term A Loan were reduced in the aggregate from $35.0
million to $30.0 million. The First Amendment also revised certain covenants to be more
consistent with the Companys business plans. The Amendments did not affect the maturity date
(December 26, 2006) of the Revolving Credit Facility, Term A
Loan or the Cypress Facility. On December 22, 2004, the Company further amended its Foothill Facility by entering into the
Second Amendment to Loan and Security Agreement (the Foothill Second Amendment). This
Foothill Second Amendment extended the maturity date of the Term B Loan to December 21, 2006.
The Foothill Second Amendment did not affect the maturity dates of the Revolving Credit
Facility, Term A Loan or the Cypress Facility and did not revise any covenants. Upon execution of the First Amendment and Second Amendment, the Company was required per EITF
96-19, Debtors Accounting for a Modification or Exchange of Debt Instruments,to record a
loss of $0.5 million on extinguishment of debt for unamortized costs associated with the
original Term B Loan and any bank related fees in relation to the recent Amendments. The Cypress Facility consists of term loans totaling $35.0 million (the Term C Loan). The
Term C Loan, $45.9 million (includes PIK interest of $10.9
million) as of December 31, 2004, has a maturity date of December 26, 2006,
and bears Pay-In-Kind (PIK) interest fixed at 12% per annum paid quarterly, which at the
lenders option can be paid in common stock of the Company. In connection with the Cypress
Facility, Holdings has issued the lenders under the Cypress Facility 60,000 warrants to
purchase approximately 5.2% of its common stock on a fully diluted basis. The 60,000
warrants, which have an exercise price of $.01 and are exercisable immediately, were valued at
$3.4 million using the Black-Scholes model. This amount was recorded as a discount to the
Term C Loan debt and included as a component of shareholders equity. The Company expects
that the effective interest rate associated with the Term C Loan will be greater than 12%
given the additional interest expense associated with the warrants. The Foothill Facility and Cypress Facility contain certain affirmative and negative covenants
and restrictions, such as EBITDA and Fixed Charges Ratio on a North America and Worldwide
basis. As of December 31, 2004, the Company was in compliance with the various covenants of
the Cypress Facility and Foothill Facility. Senior Subordinated Notes The Company has $97.8 million of Senior Subordinated Notes due 2006 (the Notes), which are
unsecured obligations of the Company and bear interest at a rate of 10.625% per annum payable
semi-annually on June 30 and December 31. The Notes are redeemable at the option of the Company on or after December 31, 2004, in whole
or in part, at par. Upon a Change of Control (as defined in the Indenture), each Note
holder has the right to require the Company to repurchase such holders Notes at a purchase
price of 101% of the principal amount plus accrued interest. The Indenture 50




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##### Table of Contents



contains certain affirmative and negative covenants and restrictions. As of December 31,
2004, the Company was in compliance with the various covenants of the Notes.In 2003, the Company purchased from Cypress a portion of the Notes with a face value of $17.2
million. The purchase was facilitated through Cypress and financed through the issuance of
additional Term C debt of $10.0 million. The extinguishment resulted in a gain of $7.2
million that is included in the Companys Consolidated Statement of Operations. The Company
and/or affiliates of the Company, including entities related to Cypress may continue, from
time to time, to purchase the Notes previously issued by the Company in the open market or by
other means.Long-term debt repayable in each of the next five years is as follows (in thousands) : 2005
    
    $
    2,9572006
    
    
    171,3002007
    
    
    2008
    
    
    2009
    
    
    $
    174,257
  Short-Term DebtAMTROL ALFA has available revolving credit facilities with local banks providing for
short-term working capital loans of up to the equivalent of approximately $12.8 million.
Borrowings under these agreements accrue interest at EURIBOR plus a premium ranging from 1.00%
to 1.25% (3.10% - 3.35% at December 31, 2004). The balance outstanding at December 31, 2003
and 2004 was approximately $9.3 million and $10.8 million, respectively. The highest amount
outstanding under these facilities in 2004 was approximately $10.8 million.Worldwide cash interest payments amounted to approximately $14.9 million, $13.7 million, and
$13.9 million for the years ended December 31, 2002, 2003 and 2004, respectively.(6)
    Income TaxesThe components of the provision  for income
taxes are as follows (in thousands): Year Ended December 31,2002
    
    
    2003
    
    
    2004Current:Federal
    
    $
    
    
    
    $
    40
    
    
    $
    State
    
    
    
    
    
    
    75
    
    
    
    150Foreign
    
    
    774
    
    
    
    1,051
    
    
    
    775774
    
    
    
    1,166
    
    
    
    925Deferred:Federal
    
    
    
    
    
    
    
    
    
    
    8,812Foreign
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,812$
    774
    
    
    $
    1,166
    
    
    $
    9,737
 51




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##### Table of Contents



The income tax rate reconciliation of the difference between actual and statutory
effective tax rates for continuing operations is as follows: 2002
    
    
    2003
    
    
    2004Benefit for income taxes at
the Federal statutory rate
    
    $
    (1,591
    )
    
    $
    252
    
    
    $
    (1,228
    )State taxes, net of Federal
tax effect
    
    
    
    
    
    
    50
    
    
    
    90Foreign
taxes rate differential
    
    
    4
    
    
    
    397
    
    
    
    (391
    )Increase (decrease) in
U.S. valuation allowance
    
    
    2,373
    
    
    
    (11
    )
    
    
    10,697Other taxes
    
    
    
    
    
    
    602
    
    
    
    327Other, net
    
    
    (12
    )
    
    
    (124
    )
    
    
    242Recorded provision
    
    $
    774
    
    
    $
    1,166
    
    
    $
    9,737
 Significant items giving rise to deferred tax assets (liabilities) are as follows (in
thousands): December 31,2003
    
    
    2004Deferred Income Taxes short-termAllowance for doubtful accounts
    
    $
    135
    
    
    $
    153Inventory adjustment
    
    
    827
    
    
    
    793Accrued liabilities and other
    
    
    527
    
    
    
    1,657Valuation allowance
    
    
    
    
    
    
    (2,603
    )$
    1,489
    
    
    $
    
 2003
    
    
    2004Deferred Income Taxes long-termNet operating loss carryforward
    
    $
    10,760
    
    
    $
    12,390Accelerated depreciation
    
    
    (2,362
    )
    
    
    (2,021
    )Warranty
reserves - long-term
    
    
    998
    
    
    
    772Deferred compensation
    
    
    394
    
    
    
    434Valuation allowance
    
    
    (2,712
    )
    
    
    (11,930
    )Other
    
    
    381
    
    
    
    355$
    7,459
    
    
    $
    
 52




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##### Table of Contents



The Company has increased the valuation allowance for certain deferred tax assets related
to net operating loss carryforwards. The increase results from a reassessment by management
of the timing and likelihood of certain prospective events central to managements tax
planning strategies, consistent with the requirements of SFAS No. 109. The net operating loss
carryforwards are long-term in nature and management may reduce the valuation allowance if its
assessment of the timing and likelihood of these prospective events changes.Cash paid for income taxes amounted to $0.9 million, $1.1 million, and $0.7 million for the
years ended December 31, 2002, 2003 and 2004, respectively. At December 31, 2004, the Company
had net operating loss carryforwards in the United States of approximately $32.1 million
expiring in 2012 through 2024.(7)
    Pension and Profit Sharing PlansThe Company has a defined contribution 401(k) plan covering substantially all of its U.S.
employees. Under the Plan, eligible employees are permitted to contribute up to 25% of gross
pay, not to exceed the maximum allowed under the Internal Revenue Code. The Company matches
each employee contribution up to 6% of gross pay at a rate of $0.25 per $1 of employee
contribution.The Company also contributes 3% of each employees gross pay up to the Social Security taxable
wage base and 4% of amounts in excess of that level up to approximately $0.2 million of wages.
Company contributions to the 401(k) plan totaled approximately $0.6 million for the years
ended December 31, 2002, 2003 and 2004.(8)
    Lease CommitmentsThe Company leases certain plant facilities and equipment. Total rental expenses charged to
operations approximated $1.6 million, $1.3 million and $1.3 million for the years ended
December 31, 2002, 2003 and 2004, respectively. Minimum rental commitments under all
non-cancelable operating leases are as follows (in thousands): 2005
    
    $
    7532006
    
    
    6382007
    
    
    5652008
    
    
    762009
    
    
    62$
    2,094
  Certain of the leases provide for renewal options.(9)
    Intangible AssetsIntangible assets consist of patents and trademarks and are amortized on a straight-line
basis over an estimated useful life of 5 years. Amortization of intangible assets amounted to
$0.1 million, $0.1 million and $0.4 million for the years ended December 31, 2002, 2003 and
2004, respectively, are included as part of Other Assets on the Company's Consolidated Balance Sheet. The table that follows presents the companys intangible assets as of
December 31, 2004 and 2003: 53




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##### Table of Contents



Gross Carrying
    
    
    Accumulated
    
    
    Net Intangible(In thousands)
    
    Amount
    
    
    Amortization
    
    
    AssetsDecember 31, 2004Patents
    
    $
    697
    
    
    $
    (609
    )
    
    $
    88Trademarks
    
    
    97
    
    
    
    (65
    )
    
    
    32$
    794
    
    
    $
    (674
    )
    
    $
    120December 31, 2003Patents
    
    $
    697
    
    
    $
    (185
    )
    
    $
    512Trademarks
    
    
    88
    
    
    
    (46
    )
    
    
    42$
    785
    
    
    $
    (231
    )
    
    $
    554
 As of December 31, 2004, the estimated annual intangible asset amortization expense for
each of the succeeding five years aggregates $0.1 million as follows: (In thousands) Year Ended
    
    Annual AmortizatonDecember 31,
    
    Expense2005
    
    $652006
    
    382007
    
    132008
    
    32009
    
    1
  (10)
    Commitments and ContingenciesAt December 31, 2004, the Foothill Agreement contained a sublimit to support the issuance of
letters of credit in the amount of $3.0 million. At December 31, 2004, letters of credit
outstanding amounted to $1.8 million.Some of the Companys operations generate or have in the past generated waste materials that
are regulated under environmental laws. Based upon the Companys experience in matters that have been resolved and the
amount of hazardous waste shipped to off-site disposal facilities, the Company believes that
any share of costs attributable to it will not be material should any litigation arise or any
claims be made in the future. However, there can be no assurance that any liability arising
from, for example, contamination at facilities the Company owns or operates or formerly owned
or operated (or an entity or business the Company has acquired or disposed of), or locations
at which waste or contaminants generated by the Company have been deposited (or deposited by
an entity or business the Company has acquired or disposed of) will not arise or be asserted
against the Company or entities for which the Company may be responsible in a manner that
could materially and adversely affect the Company.The Company monitors and reviews its procedures and policies for compliance with environmental
laws. Based upon the Companys experience to date, the Company operates in substantial
compliance with environmental laws, and the cost of 54




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##### Table of Contents



compliance with existing regulations is not expected to have a material adverse effect on the Companys results of operations,
financial condition, cash flows or competitive position. However, future events, including
changes in existing laws and regulations or enforcement policies, may give rise to additional
compliance costs which could have a material adverse effect on the Companys results of
operations, financial condition or competitive position.The Company is involved in various legal proceedings which, in the opinion of management, will
not result in a material adverse effect on its financial condition, results of operations or
cash flows.(11)
    Stock PlansCertain key employees and directors have been granted options to purchase common shares of the
Companys parent, Holdings Inc., under the AMTROL Holdings 1997 Incentive Stock Plan (the
Plan). The Plan includes both time vesting and performance-based vesting options. The
options which vest over time are subject to fixed plan accounting under APB 25. Under fixed
plan accounting, compensation is measured as the intrinsic value of the option at date of
grant. The performance-based options expired because the performance measure was not met.As of December 31, 2004, options to purchase 62,551 shares under the Plan were outstanding.
The outstanding options, which have a life of ten years and an exercise price of $100, are exercisable immediately, provided that purchased shares
are subject to repurchase by Holdings at fair market value until such shares vest under
certain circumstances.The Company applies APB Opinion No. 25 to account for its stock option plans. Accordingly,
pursuant to the terms of the Plan, no compensation cost related to the issuance of stock
options has been recognized in the Companys financial statements. During 2002, 2003 and
2004, no options were granted or vested under this plan.(12)
    Business Segment InformationAMTROLs reportable segments are delineated geographically. In addition to the geographic
delineation, the segments are managed separately because of their different product offerings,
markets served and cost structures.The Companys North American segment operates manufacturing facilities in Rhode Island,
Kentucky, Maryland and Ohio, and operates a distribution facility in Ontario, Canada. This
segment manufactures and markets products used principally in flow control, storage, heating,
and other treatment of fluids in the water system, HVAC and
refrigerant cylinders markets. These
products are marketed throughout the world but primarily in North America, Western Europe and
Asia.The Companys Europe segment includes its facilities in Guimaraes, Portugal, and Swarzedz,
Poland. The Guimaraes facility manufactures returnable and non-returnable steel gas cylinders
for storing and dispensing of cooking, heating and refrigerant gases that are marketed worldwide. The Swarzedz
facility refurbishes gas cylinders. 55




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##### Table of Contents



The primary criteria by which financial performance is evaluated and resources are allocated
include revenues and EBITDA. The method of calculating EBITDA is consistent with the
definition contained in the Foothill Facility, the Cypress Facility and the Indenture.
Readers of financial statements frequently consider EBITDA a useful tool in evaluating a
companys performance. Therefore, the Company believes that inclusion of EBITDA is useful
supplemental information. However, EBITDA is not a measure of true cash flow since it does
not incorporate changes of other assets or liabilities that may generate or require cash.
EBITDA is not a generally accepted accounting measure. The following is a summary of key
financial data by segment: 2002
    
    
    2003
    
    
    2004Net Sales to external customersNorth AmericaUSWater technologies
    
    $
    92,606
    
    
    $
    86,483
    
    
    $
    97,865Cylinders
    
    
    24,282
    
    
    
    23,927
    
    
    
    22,662OtherWater technologies
    
    
    5,412
    
    
    
    6,700
    
    
    
    7,307EuropePortugalCylinders
    
    
    55,101
    
    
    
    65,988
    
    
    
    69,267OtherCylinders
    
    
    2,015
    
    
    
    1,948
    
    
    
    1,293Consolidated
    
    $
    179,416
    
    
    $
    185,046
    
    
    $
    198,394Income from operationsNorth America
    
    $
    12,149
    
    
    $
    12,371
    
    
    $
    15,185Europe
    
    
    3,421
    
    
    
    1,212
    
    
    
    2,768Consolidated
    
    $
    15,570
    
    
    $
    13,583
    
    
    $
    17,953EBITDANorth America
    
    $
    17,336
    
    
    $
    17,434
    
    
    $
    20,060Europe
    
    
    5,661
    
    
    
    4,406
    
    
    
    5,470Consolidated
    
    $
    22,997
    
    
    $
    21,840
    
    
    $
    25,530Long-Lived assetsNorth AmericaUS
    
    $
    119,266
    
    
    $
    115,819
    
    
    $
    114,859Other
    
    
    4
    
    
    
    10
    
    
    
    9EuropePortugal
    
    
    32,441
    
    
    
    31,999
    
    
    
    33,127Other
    
    
    2,034
    
    
    
    1,888
    
    
    
    2,010Consolidated
    
    $
    153,745
    
    
    $
    149,716
    
    
    $
    150,005
 56




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##### Table of Contents



The following represents the reconciliation of EBITDA to a recognized Generally Accepted
Accounting Principles (GAAP) measure. Year Ended December 31,2002
    
    
    2003
    
    
    2004Loss from continuing operations
    
    $
    (5,456
    )
    
    $
    (422
    )
    
    $
    (13,351
    )Interest expense
    
    
    19,918
    
    
    
    19,564
    
    
    
    21,664Depreciation
    
    
    7,756
    
    
    
    8,292
    
    
    
    7,480Income taxes
    
    
    774
    
    
    
    1,166
    

    
    
    9,737Gain on extinguishment of debt
    
    
    
    
    
    
    (6,760
    )
    
    
    Loss on sale of property, plant &
equipment
    
    
    5
    
    
    
    
    
    
    
    EBITDA
    
    $
    22,997
    
    
    $
    21,840
    
    
    $
    25,530
  (13)
    Discontinued OperationsThe Company, on February 27, 2004, completed the sale of the stock of AMTROL Holdings GmbH
(Holdings) to DTT NOVA Beteiligungen GmbH & Co. KG (DTT) for 300,000 Euros or
$363,000 of which $238,000 was received during the second quarter of
2004. Holdings
principal subsidiary is AMTROL Nova GmbH & Co. KG, a German-based manufacturer of indirect
fired water heaters. DTT is a German-based company that operates as a manufacturer of water
heaters.Holdings results of operations were included within the Companys Europe segment. The
Company has treated the sale of Holdings as a discontinued operation; accordingly the results
of operations of Holdings are excluded from continuing operations for all periods presented.
In addition, the assets and liabilities of Holdings are reflected as assets and liabilities
from discontinued operations in the accompanying December 31, 2003 balance sheet. There was
no interest expense allocated to this discontinued operation.The following table illustrates the net loss recorded on sale of Holdings: Net assets of Holdings at 2/27/04
    
    $5,973Net proceeds
    
    (363)Net Loss prior to write-off of currency translation adjustment
    
    5,610Loss resulting from write-off of currency translation adjustment
    
    2,483Net loss recorded on sale of Holdings
    
    $8,093
  The following table illustrates Holdings Net sales and Pre-tax loss for each of the periods
presented (in thousands): Year Ended December 31,2002
    
    
    2003
    
    
    2004Net sales
    
    $
    7,387
    
    
    $
    11,111
    
    
    $
    1,871Pre-tax loss
    
    
    (5,381
    )
    
    
    (1,310
    )
    
    
    (770
    )
 57




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##### Table of Contents



Item 15(a)(2)
    SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (in thousands)Balance atBeginning of
    
    
    
    
    
    
    
    
    
    
    Adjustments/
    
    
    Balance at EndConsolidated
    
    Period
    
    
    Provision
    
    
    Recoveries
    
    
    Write-Offs
    
    
    of PeriodYear ended December 31, 2002Allowance for doubtful
accounts
    
    
    1,291
    
    
    
    143
    
    
    
    
    
    
    
    (359
    )
    
    
    1,075Year ended December 31, 2003Allowance for doubtful
accounts
    
    
    1,075
    
    
    
    77
    
    
    
    44
    
    
    
    
    
    
    
    1,196Year ended December 31, 2004Allowance for doubtful
accounts
    
    
    1,196
    
    
    
    73
    
    
    
    
    
    
    
    (220
    )
    
    
    1,049
 58




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##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized, in West Warwick, Rhode Island, on the 31st day of March 2005. AMTROL Inc.By:
    
    s/s Larry T. GuillemetteLarry T. GuillemetteChief Financial OfficerDate:March 31, 2005
 Pursuant to the requirements of the Securities Act of 1934, this Form 10-K has been signed by the
following persons in the capacities and on the date indicated. Signature
    
    Title
    
    Dates/s       Albert D. Indelicato

     Albert D. Indelicato
    
    President, Chairman of the Board,
Chief Executive Officer and Director
(Principal Executive Officer)
    
    March 31, 2005s/s                 Larry T. Guillemette

     Larry T. Guillemette
    
    Exec. Vice President, Chief Financial
Officer, and Treasurer (Principal
Financial Officer)
    
    March 31, 2005s/s  Joseph L. DePaula

     Joseph L. DePaula
    
    Vice President and Worldwide
Controller (Principal Accounting
Officer)
    
    March 31, 2005s/s  John P. Cashman

     John P. Cashman
    
    Director
    
    March 31, 2005s/s  David P. Spalding

     David P. Spalding
    
    Director
    
    March 31, 2005s/s  James A. Stern

     James A. Stern
    
    Director
    
    March 31, 2005s/s                  Gerald Willinger

     Gerald Willinger
    
    Director
    
    March 31, 2005
 59




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##### Table of Contents



EXHIBIT INDEX Exhibit #
    
    Document Description3.1
    
    Restated Articles of Incorporation of AMTROL Inc. (incorporated by reference from the Companys Registration Statement on
Form S-4, Registration No. 333-18075, declared effective by the Securities and Exchange Commission on January 2, 1997).3.2
    
    Bylaws of AMTROL Inc. (incorporated by reference from the Companys Registration Statement on Form S-4, Registration No.
333-18075, declared effective by the Securities and Exchange Commission on January 2, 1997).4.1
    
    Indenture, dated as of November 1, 1996 between AMTROL Acquisition, Inc. and The Bank of New York (incorporated by
reference from the Companys Registration Statement on Form S-4, Registration No. 333-18075, declared effective by the
Securities and Exchange Commission on January 2, 1997).4.2
    
    Form of 10-5/8% Senior Subordinated Notes due 2006 (included in Exhibit 4.1) (incorporated by reference from the Companys
Registration Statement on Form S-4, Registration No. 333-18075, declared effective by the Securities and Exchange
Commission on January 2, 1997).4.3
    
    First Supplemental Indenture, dated as of November 13, 1996, between AMTROL Inc. and The Bank of New York (incorporated by
reference from the Companys Registration Statement on Form S-4, Registration No. 333-18075, declared effective by the
Securities and Exchange Commission on January 2, 1997).10.1
    
    Credit Agreement, dated as of November 13, 1996, among AMTROL Acquisition, Inc. and AMTROL Holdings, Inc., various lending
institutions party thereto, Morgan Stanley Senior Funding, Inc. as documentation agent, and Bankers Trust Company, as
administrative agent (incorporated by reference from the Companys Registration Statement on Form S-4, Registration No.
333-18075, declared effective by the Securities and Exchange Commission on January 2, 1997).10.1.1
    
    First Amendment to Credit Agreement, dated as of June 24, 1997 (incorporated by reference to the Companys Quarterly Report
on Form 10-Q for the quarter ended July 5, 1997).10.1.2
    
    Second Amendment to Credit Agreement, dated as of December 12, 1997 (incorporated by reference to Exhibit 7(c) in the
Companys Current Report on Form 8-K dated December 22, 1997).10.1.3
    
    Third Amendment to the Credit Agreement dated as of June 24, 1998 (incorporated by reference to the Companys Quarterly
report on Form 10-Q for the quarter ended July 4, 1998).10.1.4
    
    Fourth Amendment to the Credit Agreement dated as of July 13, 1998 (incorporated by reference to the Companys Quarterly
report on Form 10-Q for the third quarter ended October 3, 1998).10.1.5
    
    Fifth Amendment to the Credit Agreement dated as of March 30, 2001 (incorporated by reference to the Companys Annual
Report of Form 10-K for the fiscal year ended December 31, 2000).10.2
    
    AMTROL Inc. Pension Plan and Trust (incorporated by reference from the Companys Registration Statement on Form S-1,
Registration No. 33-48413, declared effective by the Commission on March 18, 1993).*10.3
    
    Amendments to AMTROL Inc. Pension Plan and Trust (incorporated by reference from the Companys Registration Statement on
Form S-1, Registration No. 33-48413, declared effective by the Securities and Exchange Commission on March 18, 1993).*10.4
    
    AMTROL Inc. Executive Cash Bonus Plan (incorporated by reference from the Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 1994).*
 60




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##### Table of Contents



Exhibit #
    
    Document Description10.5
    
    AMTROL Inc. Supplemental Retirement Plan II (incorporated by reference from the Companys Registration Statement on Form
S-1, Registration No. 33-48413, declared effective by the Commission on March 18, 1993).*10.6
    
    First Amendment to AMTROL Inc. Supplemental Retirement Plan II (incorporated by reference from the Companys Annual Report
on Form 10-K for the fiscal year ended December 31, 1995).*10.10
    
    Employment Agreement dated June 24, 1998 by and between AMTROL Inc. and Albert D. Indelicato (incorporated by reference
from the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 1998).*10.11
    
    AMTROL Holdings Inc. 1997 Incentive Stock Plan dated December 16, 1997. (incorporated by reference to the Companys Annual
Report on Form 10-K for the year ended December 31, 1997).*10.12
    
    Loan and Security Agreement dated December 26, 2001 among Amtrol Holdings, Inc., Amtrol Inc. and WaterSoft Inc. and
Foothill Capital Corporation as the Arranger and Administrative Agent (incorporated by reference from the Companys Annual
Report on Form 10-K for the fiscal year ended December 31, 2001).10.12.1
    
    First Amendment and Waiver To Loan and Security Agreement dated November 18, 2003 among Amtrol Holdings, Inc., Amtrol Inc.,
WaterSoft Inc., Amtrol Canada LTD (incorporated by reference from the Companys Form 8-K dated November 25, 2003).10.13
    
    Loan and Security Agreement dated December 26, 2001 among Amtrol Holdings, Inc., Amtrol Inc. and WaterSoft Inc. and Cypress
Merchant Banking Partners, L.P. and Cypress Offshore Partners, L.P. (incorporated by reference from the Companys Annual
Report on Form 10-K for the fiscal year ended December 31, 2001).10.13.1
    
    First Amendment to Loan and Security Agreement dated November 18, 2003 among Amtrol Holdings, Inc., Amtrol Inc., WaterSoft
Inc., Amtrol Canada LTD, and Cypress Merchant Banking Partners, L.P. and Cypress Offshore Partners, L.P. (incorporated by
reference from the Companys Form 8-K dated November 25, 2003).10.13.2
    
    Second Amendment to Loan and Security Agreement dated November 18, 2003 among Amtrol Holdings, Inc., Amtrol Inc., WaterSoft
Inc., Amtrol Canada LTD, and Cypress Merchant Banking Partners, L.P. and Cypress Offshore Partners, L.P. (incorporated by
reference from the Companys Form 8-K dated November 25, 2003).10.13.3
    
    Second Amendment to Loan and Security Agreement dated December 22, 2004 among Amtrol Holdings, Inc., Amtrol Inc., WaterSoft
Inc., Amtrol Canada LTD, and Wells Fargo Foothill, Inc.10.14
    
    Subsidiary Guaranty Agreement dated December 26, 2001 among Amtrol International Investments, Inc. and Cypress Merchant
Banking Partners, L.P. and Cypress Offshore Partners, L.P. (incorporated by reference from the Companys Annual Report on
Form 10-K for the fiscal year ended December 31, 2001).10.15
    
    Contribution Agreement dated December 26, 2001 among Amtrol Holdings, Inc., Amtrol Inc. and WaterSoft Inc. and Cypress
Merchant Banking Partners, L.P. and Cypress Offshore Partners, L.P. (incorporated by reference from the Companys Annual
Report on Form 10-K for the fiscal year ended December 31, 2001).10.16
    
    Subsidiary Guaranty Agreement dated December 26, 2001 among Amtrol International Investments, Inc. and Foothill Capital
Corporation (incorporated by reference from the Companys Annual Report on Form 10-K for the fiscal year ended December
31, 2001).10.17
    
    Contribution Agreement dated December 26, 2001 among Amtrol Holdings, Inc., Amtrol Inc. and WaterSoft Inc. and Foothill
Capital Corporation (incorporated by reference from the Companys Annual Report on Form 10-K for the fiscal year ended December
31, 2001).10.18
    
    Change of Control Agreement dated October 29, 2004 among Amtrol Holdings Inc. and Albert D. Indelicato.*10.19
    
    Change of Control Agreement dated October 29, 2004 among Amtrol Holdings Inc. and Larry T. Guillemette.*
 61




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##### Table of Contents



Exhibit #
    
    Document Description10.20
    
    Change of Control Agreement dated October 29, 2004 among Amtrol Holdings Inc. and Joseph DePaula.*10.21
    
    Severance Agreement dated October 29, 2004 among Amtrol Holdings Inc. and Christopher A. Laus.*10.22
    
    Severance Agreement dated October 29, 2004 among Amtrol Holdings Inc. and Christopher A. Van Haaren.*10.23
    
    Severance Agreement dated October 29, 2004 among Amtrol Holdings Inc. and Michael A. Montigny.*10.24
    
    Severance Agreement dated October 29, 2004 among Amtrol Holdings Inc. and Gerard McKeown.*10.25
    
    Severance Agreement dated October 29, 2004 among Amtrol Holdings Inc. and Michael Termaat.*10.26
    
    Form of Indemnification Agreement entered into between Amtrol Inc. and each Board of Director.10.27
    
    Form of Indemnification Agreement entered into between Amtrol Holdings Inc. and each Board of Director.14
    
    Code of Ethics18
    
    Preferability letter regarding change in accounting policy from LIFO to FIFO (incorporated by reference from the Companys
Annual Report on Form 10-K for the fiscal year ended December 31, 1998).21
    
    Subsidiaries of AMTROL Inc.31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14 (a) under the Securities Exchange Act of 1934.32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
   *
    
    Management contract or compensatory plan arrangement. 62